摘要：Several countries in Sub-Saharan Africa (SSA) embraced the structural adjustment programs (SAPs) suggested by the World Bank and the International Monetary Fund (IMF) in the 1980s. SAPs entail three main transitions: (1) from state control to market-led development; (2) from authoritarianism to rule of law, and (3) from central control to constitutionalism (Cass, 1991). The transitions are interrelated and form the main pillars of a market economy to promote growth in SSA. As a part of SAPs, many African countries began to reform their financial sectors and some countries established stock exchanges or expanded existing one. The existing literature suggests possible correlation between development of financial markets and overall economic growth. An understanding of the causal links would promote better policy decision-making, especially in sequencing policies to promote economic growth driven by a developed financial sector. Since the history of financial systems of African countries is relatively short, the studies to explore the relationship between financial market development and economic growth rely on a panel with small number of cross-section units or time periods. We note, however, most existing work studying correlation between developments of financial markets and overall economic growth in SSA fails to take into account the panel nature of the data used in the analysis. This oversight leads to inconsistent estimation results owing to the so called incidental parameter problem (Lancaster, 2000). This paper investigates the causal relationship between stock exchange development, institutional and macroeconomic variables, and economic growth using data from SSA countries, using an approach for panels with small number of cross-sectional units or time periods, tackling the incidental parameter problem.
