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Stock markets, financial development and economic growth in sub-Saharan Africa

Muba, Seif R.


Seif R. Muba



In general, this study examines the Stock Market, Financial Development and Economic Growth in selected sub-Sahara African countries. Empirically, Chapter Two of the study used Generalised Method of Moment (GMM) dynamic instrumental variable approach to investigate financial development and economic growth nexus in the East African countries. Also, the study applied both Fixed Effect Estimation (FEM) techniques and Panel vector autoregressive (PVAR) to analyse the causal effects of equity market development on economic growth in eleven sub-Sahara African countries, in Chapter Three of this study. On the other hand, Chapter Four of this study measures the conditional variance (volatility) of the stock returns of Tanzanian stock market (Dar-es-Salaam Stock Exchange). For modelling stock market return volatility, we use both standard and asymmetric GARCH models to capture the volatility clustering and asymmetric features in the financial data of the companies selected.

To attain the objectives of all three empirical chapters highlighted above, this study had to consider various important and necessary tests; such as tests for unit root, to check if the expected variables were stationary, and tests for cointegration to check whether there was a long-run equilibrium relationship between variables under study in Chapter Two and Chapter Three. However, in Chapter Four (modelling volatility) we tested for an additional ARCH effects apart from stationarity (unit root) tests we have had. Specifically, this study found that there is causal relationship between financial development (when presented by indicator domestic credit to private sector) and economic growth in the East African countries (EAC). Also, we found that the domestic credit to private sector as an indicator for financial development has a role to play in economic growth of EAC.

Moreover, we find that there is unidirectional Granger causality, which flows from equity market development (using indicator market capitalization rate-MCR) to economic growth of the panel of 11 sub-Sahara African countries. We also declare that stock market development via MCR play a positive role in SSA economic growth. In addition, the study reveals that there is existence of leverage effects in Tanzanian stock market, therefore, the bad news (negative shocks) reflect an increase in the conditional variance (volatility) of DSE stock returns for the next period than the good news. However, we find that the volatility clustering exists in Tanzanian stock market returns.


Muba, S. R. (2016). Stock markets, financial development and economic growth in sub-Saharan Africa. (Thesis). University of Hull. Retrieved from

Thesis Type Thesis
Deposit Date Aug 17, 2017
Publicly Available Date Feb 23, 2023
Keywords Business
Public URL
Additional Information Business School, The University of Hull
Award Date Sep 1, 2016


Thesis (3.1 Mb)

Copyright Statement
© 2016 Muba, Seif R. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright holder.

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