STOCK MARKET DEVELOPMENT AND ECONOMIC GROWTH: EVIDENCE FROM ZIMBABWE

The study explores the causal linkage between stock market development and economic growth in Zimbabwe for the period 1990: I to 2010: IV. Applying the Augmented Dickey Fuller(ADF) unit root tests and the long-run Grangernon-causality estimation technique proposed by Toda and Yamamoto (1995), we tested the nature and direction of the causality between economic growth proxy by the real GDP growth rate and stock market development proxy by real market capitalization, value traded ratio and stock market volatility; and found that in line with the supply leading hypothesis-a bi-directional causality exists between economic growth and stock market development. The study recommends that both economy planners and stock market managers should ensure that the market and economy should be stimulated to grow at an increasingly consistent rate.