Stock market development and economic growth in the SADC region: Evidence from seven selected countries

Abstract

As global investors focus on emerging market economies for sourcesof real growth, Southern African Development Community (SADC)member states have seen varying degrees of economic and stockmarket development. Of the 15 member states, South Africa, with aGross Domestic Product (GDP) of US$481.1 billion, is the only countrywith a developed and robust stock market, averaging 171.1 percent ofthe country’s GDP. This study brings together seven selected SADCeconomies using the Granger causality approach and the vector errorcorrection model to find the relationship between their economic growthand stock market development. The study draws conclusions based onthe theory suggested by Patrick (1966) on the ‘demand pulling’ and‘supply-led’ phenomena between economic growth and stock marketdevelopment with particular reference to the selected SADC countries.