E3 Journal of Business Management and Economics
E3 Journal of Business Management and Economics Vol. 10 (1) pp. 031-039, August 2019; © E3 Journals; ISSN 2141-7482
Capital market liberalisation and capital formation: Time-Series evidence from Sub-Saharan Africa
Eguolo May Vanni1 , Freeman Oghenerume Orubu2 * , Emmanuel Agbavwe21 Department of Economics, University of Aberdeen,Scotland, UK
2 Department of Business administration and Management, Delta State Polytechnic, Ozoro, Nigeria
*Corresponding Author E-mail: oruburume@gmail.com
Accepted 7 May 2019
Abstract
The aim of this study is to empirically investigate the relationship between capital market liberalisation and capital formation in five Sub-Saharan African countries. Annual time series data covering a period of twenty six years from 1988 to 2013 is obtained from the World Bank΄s World Development Indicators and the IMF΄s International Financial Statistics. The study employs the Johansen cointegration procedure within a VAR framework and Granger causality testing in order to examine the relationship between capital market liberalisation indicators and capital formation. The results provide very limited support to the view that capital market liberalisation is a very important determinant of capital formation. The results also show some evidence of unilateral causality. The study implies that liberalising capital markets of countries within the SubSaharan African region is by no means sufficient to boost capital formation or investment levels in the region. Furthermore, the findings strongly indicate that the effects of capital market liberalisation differ across countries, suggesting that the results from crosssectional studies which consider all countries as identical entities should be interpreted with caution.
Keywords: Capital Market Liberalisation, Stock market liberalisation, capital formation, Sub- Saharan Africa, Time series analysis.
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