AI Summary & Key Takeaways
AI InsightThe increase in overall money supply allows for investment in productive sectors of the economy.
📌 3 Key Takeaways
Abstract
Purpose- The study investigates the effect of financial deepening on stock market performance in selected Sub-Saharan African countries by determining the relationship that exist between financial deepening and stock market performance. Expansion in the financial services to reach out to the underbanked or unbanked in our society enables these individuals to assess banking services, thereby boosting economic activities. Methodology- The study considers four selected countries in Sub-Saharan African over the period 2001 to 2019. Multiple regression analysis techniques were used with Seemingly Unrelated Regression (SUR) to analyse the data. SUR used in this analysis provides the lowest standard errors of the estimated parameters. Findings- Ordinary Least Square (OLS) gives consistent results. However, it is not as efficient as the SUR method, which amounts to feasible generalised least squares with a specific form of the variance matrix. It solves the problem of endogeneity. The study conducted Augmented Dicky Fuller (ADF) test, Hausman test, and Bruce Pagan test to avoid any challenges associated with data normality. Conclusion- The research finds out that broad money supply, a proxy for financial deepening, positively and statistically significantly impacted stock market performance in each of the four countries. It was recommended that all countries involved in this study and others implement policies that seek to enhance financial deepening in increasing broad money supply as a percentage of GDP. The increase in overall money supply allows for investment in productive sectors of the economy.