Does Supply-Leading Hypothesis Holds in South Africa? Evidence from ARDL Estimation Technique
PDF

How to Cite

ALI, H. S., ZUBAIRU, A. N., & ABDULLAHI, Y. J. (2015). Does Supply-Leading Hypothesis Holds in South Africa? Evidence from ARDL Estimation Technique. Journal of Economics Bibliography, 2(4), 194–200. https://doi.org/10.1453/jeb.v2i4.545

Abstract

Abstract. Using ARDL bound test procedure the present study investigates whether economic growth influences financial sector development through stock market development in South Africa for the period of 2005 to 2014.The finding shows that growth of the economy enhances financial sector development through stock market medium in South Africa both in short run and long-run phenomenon. The finding confirmed the existence of Joan Robison (1952) supply leading hypothesis in the country investigated. The policy implication is that the authority in this country needs to put additional efforts in policies that will boost the overall performance of the economy considering its positive influence on financial sector development via stock market boost. Effective policies that will enhance the competitiveness of the stock market performance are essential ingredient that will boost the performance of the stock market and hence will have multiplier effect on the overall economy.

Keywords. Financial Development, Economic growth, ARDL, Cointegration, South Africa.

JEL. F40, F43, F63.


https://doi.org/10.1453/jeb.v2i4.545
PDF

References

Ang, J.B., & McKibbin, W.J., (2007). Financial liberalization, financial sector development and growth: evidence from Malaysia, Journal of Development Economics, 84(1), 215–233. doi. 10.1016/j.jdeveco.2006.11.006

Ang, J. B. (2008). What are the mechanisms linking financial development and economic growth in Malaysia?, Economic Modelling, 25(1), 38-53. doi. 10.1016/j.econmod.2007.04.006

Atje, R., & Jovanovic, B., (1993). Stock markets and development. European Econonimc Review, 37(2-3), 632-640. doi. 10.1016/0014-2921(93)90053-D

Banerjee, A., Dolado, J., & Mestre, R. (1998). Error‐correction mechanism tests for cointegration in a single‐equation framework. Journal of Time Series Analysis, 19(3), 267-283. doi. 10.1111/1467-9892.00091

Christopoulos, D.K., & Tsionas, E.G., (2004). Financial development and economic growth: Evidence from panel unit root and cointegration tests. Journal of Development Economics. 73(1), 55–74. doi. 10.1016/j.jdeveco.2003.03.002

Demirgüç-Kunt, A., & Levine, R. (1996). Stock markets, corporate finance and economic growth: an overview, World Bank Economic Review, 10(2), 223-239. doi. 10.1093/wber/10.2.223

Demirguc-Kunt, A., & Maksimovic, V., (1998). Law, finance and firm growth. Journal of Finance, 53(6), 2107-2137.

Fosu, O.A., & Magnus, F.J. (2006). Bounds testing approach to cointegration: an examination of foreign direct investment trade and growth relationships. American Journal of Applied Sciences, 3(11), 2079-2085. doi. 10.3844/ajassp.2006.2079.2085

Fry, M.J., (1978). Money and capital or financial deepening in economic development. Journal of Money, Credit and Bank. 10, 464–475.

Galbis, V., (1977). Financial intermediation and economic growth in less-developed countries: A theoretical approach. Journal of development Studies, 13(2), 58–72. doi. 10.1080/00220387708421622

Goldsmith, R.W. (1969). Financial Structure and Development. Yale University Press, New Haven, CT.

Greenwood, J., & Bruce, S., (1997). Financial markets in development, and the development of financial markets. Journal of Economic Dynamics and Control. 21(1), 145–181. doi. 10.1016/0165-1889(95)00928-0

Khan, M.A., Qayyum, A., & Saeed, A.S. (2005). Financial development and economic growth: The case of Pakistan. Pakistan Development Review, 4(44), 819–837.

King, R.G., & Levine, R., (1993). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics, 108(3), 717–737. doi. 10.2307/2118406

Law, S. H., & Singh, N. (2014). Does too much finance harm economic growth?, Journal of Banking & Finance, 41, 36-44. doi. 10.1016/j.jbankfin.2013.12.020

Levine, R. & Zervos, S. (1996). Stock market development and long-run growth. World Bank Economic Review, 10(2), 323-39. doi. 10.1093/wber/10.2.323

Levine, R., & Zervos, S., (1998). Stock markets, banks, and growth. American Economic Review. 88(3),537–558.

McKinnon, R., (1973). Money and Capital in Economic Development. The Brookings Institute, Washington.

Pesaran,M.H., Shin, Y., Smith, R.J., (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Economics, 16, 289–326.

Rachdi, H. (2011). The causality between financial development and economic growth: A panel data cointegration. International Journal of Economics and Finance, 3(1), 143. doi. 10.5539/ijef.v3n1p143

Robinson, J. (1952). The generalization of the general theory. The Rate of Interest and Other Essays, 2, 1-76.

Samargandi, N., Fidrmuc, J., & Ghosh, S. (2014). Financial development and economic growth in an oil-rich economy: The case of Saudi Arabia. Economic Modelling, 43, 267-278. doi. 10.1016/j.econmod.2014.07.042

Schumpeter, J. A. (1934). The Theory of Economic Development. Translated by Redvers Opie, Cambridge MA: Harvard University Press

Shaw, E.S., (1973). Financial Deepening in Economic Development. New York: Oxford University Press.

Singh, A. (1997): Stock markets, financial liberalization and economic development. The Economic Journal, 107, 771-82.

Thakor, A.V., 1996. The design of financial systems: an overview. Journal of Banking and Finance, 20(5), 917–948. doi. 10.1016/0378-4266(95)00033-X

Creative Commons License
This article licensed under Creative Commons Attribution-NonCommercial license (4.0)

Downloads

Download data is not yet available.