Abstract
The study examined the joint impact of foreign capital flow and stock market performance on economic growth in sub Sahara Africa. Three (3) economies (Nigeria, Kenya and South Africa) were selected from among the 51 economies in the region, and data spanning 22 years (1995-2017) were obtained and subjected to econometric analysis. The pooled mean group estimator (panel ARDL) was employed for data analysis, after preliminary diagnostics has been carried out to check for the time properties of the data set.
Pooled results revealed that all foreign capital flow and stock market indicators were positive and significant drivers of growth in the long run, on the contrary short run result revealed that the stock market inhibited growth in the region. Country specific estimates produced mixed findings as some variant of capital flow was found to be positive while the other negative for the same country, for example FDI was found to enhance growth in Nigeria but hampers growth in Kenya and South Africa. On the other hand, while a significant positive short run relationship was found between FPI and growth in Nigeria and South Africa, an inverse relationship between this variable was recorded in Kenya. Country specific result also revealed significant positive relationship between stock market and economic growth in Kenya, Nigeria and South Africa, although the magnitude was found to be lesser in South Africa.
Premise on findings, the study made the conclusion that foreign capital flows (FDI, FPI) and stock market performance (MCAP, TVL) jointly enhance economic growth (RGDP) in SSA economies thorough their joint role in the accumulation and redistribution of capital. The study therefore made the recommendation that Policy makers must make adequate policies aimed in attracting foreign capital, as this form of capital has been seen to bridge the gap between investment and levels of savings.
