Financial Sector Openness and Stock Market Development in Ghana

Charles BARNOR, Emmanuel Agyapong WIAFE


The economy of Ghana has liberalised it financial sector and stock market operation. However, there is no study on the effect of this openness on the performance of stock market in Ghana. Therefore, this study sought to examine the effect of financial openness on the stock market development in Ghana by controlling for the financial crisis. The study used quarterly data from WDI for the analysis. Using the ARDL method, the study found that there exist a positive correlation between stock market performance and financial openness in Ghana. Similarly, it was found that the financial crisis had a negative effect on the stock market development in Ghana. Other variables that were found to affect the stock performance were exchange rate, inflation and GDP per capita. It is therefore recommended that measure to deepen financial sector liberalisation should be encourage. Also, good macroeconomic performance is needed, hence government and the Central Bank of Ghana should make effort to encourage investment that would lead to economic growth of the country and also ensures exchange rate stability.

Keywords: Financial development, stock market, openness, Ghana, cointegration

JEL Code: G01, G10, G28, G32

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