ABSTRACT
This study investigated the causal relationship between the performance of the Malawi Stock
Exchange (MSE) and economic growth in Malawi using quarterly data for the period 2003 to
2017. Stock market performance was measured using four indicators: the all share price index,
total stock market capitalisation, stock market liquidity, and the number of shares traded.
Economic growth was measured by real Gross Domestic Product (GDP). The Autoregressive
Distributed Lag (ARDL) model was used to test for the existence of a long- run co-integrating
relationship between the variables, while Granger causality tests, impulse response functions
and variance decomposition analyses were employed to examine the short- run dynamics.
The co-integration tests found no evidence of a long-run relationship between real GDP and all
measures of stock market performance. However, there was evidence of the existence of shortrun
relationships, with a positive and significant contemporaneous relationship noted between
real GDP and stock market capitalisation and a negative and significant relationship between
real GDP and market liquidity. The Granger causality tests revealed the following
intertemporal relationships: bidirectional causality between real GDP and stock market
liquidity and unidirectional causality from stock market capitalisation to real GDP and changes
in the all share price index to real GDP. The impulse response functions and variance
decompositions further revealed real GDP reacts highly to a shock in market capitalisation than
to other variables and a shock in real GDP causes a higher fluctuation in liquidity than in any
other variables. The findings of this study thus show that there is short-term causality between
the performance of the MSE and economic growth in Malawi albeit that no long-run
relationship exists. In light of these results, specific policy recommendations are provided for
various stakeholders so as to enhance economic growth in Malawi. Suggestions for future
research are also given.
Ng’oma, D (2021). The impact of stock market performance on economic growth in Malawi. Afribary. Retrieved from https://track.afribary.com/works/the-impact-of-stock-market-performance-on-economic-growth-in-malawi
Ng’oma, Diana "The impact of stock market performance on economic growth in Malawi" Afribary. Afribary, 15 May. 2021, https://track.afribary.com/works/the-impact-of-stock-market-performance-on-economic-growth-in-malawi. Accessed 19 Nov. 2024.
Ng’oma, Diana . "The impact of stock market performance on economic growth in Malawi". Afribary, Afribary, 15 May. 2021. Web. 19 Nov. 2024. < https://track.afribary.com/works/the-impact-of-stock-market-performance-on-economic-growth-in-malawi >.
Ng’oma, Diana . "The impact of stock market performance on economic growth in Malawi" Afribary (2021). Accessed November 19, 2024. https://track.afribary.com/works/the-impact-of-stock-market-performance-on-economic-growth-in-malawi