Evaluating the interactive effect of domestic and global stock market variables on the depth of the financial system in Sub-Saharan African countries: a panel ARDL approach
ISSN: 0144-3585
Article publication date: 31 May 2022
Issue publication date: 18 April 2023
Abstract
Purpose
This study investigated the interactive impact of global and domestic stock market variables on the depth of the financial system in Sub-Saharan African (SSA) countries from 1990 to 2018.
Design/methodology/approach
The study used the mean group and pooled mean group estimators for the dynamic heterogeneous panel.
Findings
The results provide strong statistical evidence that the depth of the financial system in SSA countries is influenced by a combination of local and international stock market indicators. While the local variables exert a positive influence, the global indicator tends to negatively affect the depth of the system, particularly the monetization ratio.
Practical implications
While the tendency of portfolio adjustments and reversal can be inferred, the study stresses the need for a more globalized approach to financial policy formulation and implementation even as the trend of global financializaton gets more robust and more profound.
Originality/value
This study is unique in that, unlike prior ones, it has extended the debate on the role of the stock market in financial deepening from a domestic to an international dimension. Financial policy making can be aided by the authors' findings through looking at the financial deepening-stock market linkage from both domestic and globalized perspectives.
Keywords
Citation
Kalu, E.U., Arize, A.C., Ilo, S.O., Ihegboro, I. and Eze, C.G. (2023), "Evaluating the interactive effect of domestic and global stock market variables on the depth of the financial system in Sub-Saharan African countries: a panel ARDL approach", Journal of Economic Studies, Vol. 50 No. 3, pp. 601-624. https://doi.org/10.1108/JES-05-2021-0230
Publisher
:Emerald Publishing Limited
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