Stock market development in Africa: is there a need for a cross-regional collaborative stock exchange?

This paper explores the relationship between stock market development and economic growth in \nAfrica. It provides a theoretical basis for establishing the channel through which stock market \naffect economic growth and this is empirically examined by using regression analysis to test if \nindeed there is such a relationship. Three stock market indicators, namely market capitalization \nas a percentage of GDP, turnover ratio and numbers of listed shares, are used to test whether \nthey have any impact on economic growth, together with other explanatory variables of growth \nsuch as foreign direct investment, inflation and credit. The study uses data on four countries: \nKenya, Nigeria, Egypt and South Africa for the period 1991-2010. Furthermore, the study \ninvestigated whether a collaborative regional cross-listing will improve the stock market \ndevelopment of the country of secondary listing. Dummy variables and interactive variables are \nused in regressions to test for collaborative relationships between the exchanges in the region. \nThe results show that indeed there is an association between stock market development and \neconomic growth. Results also show that cross-listing within a region can boost stock market \ndevelopment, which in turn boosts economic growth. Africa does not have a lot of cross-listings \nbut from this paper, the evidence suggests that it is a path worth exploring.