Stock market development and economic growth - evidence from Kenya

Abstract

The main purpose of this study was to explore the relationship between the stock market development and economic growth by establishing a causal link between them using annual time series data for the period 1990 to 2014. The study utilized econometric techniques such as Unit Root Tests, Vector Auto-regressive model and Granger Causality Tests. The empirical results did not show a direct link between economic growth and the stock market. However, they showed that foreign direct investment granger causes the stock market variables and therefore has an impact on the growth in size and liquidity of the Kenyan stock market.