EMPIRICAL REVIEW The link between capital market and economic growth has been empirically investigated by researchers

in both Nigeria and other countries. 2.2.1 EMPIRICAL REVIEW ON OTHER COUNTRIES Demetriades, et al (2001 utili!ed time series data "rom "ive developed countries, to e#amine the relationship between stock market and economic growth, controlling "or other e""ect o" the banking system and stock market volatility. Their result supports the view that, although banks and stock market may promote economic growth, the e""ect o" bank is more. They suggested that the contribution o" stock market to economic growth may have been e#aggerated by studies that uses cross country regressions. $ohtadi and %garwal (200& e#amined the capital market and economic growth in developing countries using a panel data approach that covers 21 emerging markets over 21 years (1'(( ) 1''( , they "ound that turnover ratio is an important and statistically insigni"icant determinant o" investment by "irms and that these investment in turn are signi"icant determinant o" aggregate growth. *oreign direct investment is also "ound to have a strong positive in"luence on aggregate growth. The result o" their study indicates that both turnover ratio and market capitali!ation are important variables as determinants o" economic growth. Nieuwerburgh, et al (200+ relationship between capital (stock causes economic growth in ,elgium. investigated the long term market development and

economic growth in ,elgium. Their result shows that the market

$ishra, et al (2010 e#amined the impact o" capital market e""iciency on economic growth o" -ndia using the time series data on market capitali!ation, total market turnover and stock price inde# over the period spanning "rom the "irst .uarter o" 1''1 to the "irst .uarter o" 2010. Their study reveals that there is a linkage between capital market e""iciency and economic growth in -ndia. This linkage is established through high rate o" market capitali!ation and total market turnover. The large si!e o" capital market as measured by greater market capitali!ation is positively correlated with the ability to mobili!e capital and diversi"y risk on an economy wide basis. The increasing trend o" market capitali!ation in -ndia would certainly bring capital market e""iciency and thereby contribute to the economic growth o" the country. 2.2.2 EMPIRICAL REVIEW ON NIGERIA %dam and /anni (200+ e#amined the role o" stock market in Nigeria0s economic growth using 1ranger)2ausality test and regression analysis. The study discovered a one)way causality between 1D3 growth and market capitali!ation and a two)way causality between 1D3 growth and market turnover. They also observed a positive and signi"icant relationship between 1D3 growth turnover ratios. The study advised that government should encourage the development o" the capital market since it has a positive relationship with economic growth. 4bamiro (200+ investigated the role o" the Nigerian stock market in the light o" economic growth. The author reported a signi"icant positive e""ect o" stock market on economic growth. 5e suggested that government should create more enabling environment

so as to increase the e""iciency o" the stock market, and to attain higher economic growth. 6wah, et al (200' appraised the impact o" the Nigeria capital market e""iciency on the economic growth o" the nation using time series data "rom 1'71 to 200&. They "ound that the capital market in Nigeria has potential o" growth inducing but it has not contribute meaning"ully to the economic growth o" Nigeria because o" low market capitali!ation, illi.uidity, misappropriation o" "unds among others. 6!eoha, et al (200' investigated the nature o" the relationship that e#ists between stock market development and the level o" investment (domestic private investment and "oreign private investment "lows in Nigeria. The study discovered that stock market development promotes domestic private investment "lows, thus suggesting the enhancement o" the economy0s production capacity as well as promotion o" the growth o" national output. 5owever, the results show that stock development has not been able to encourage the "low o" "oreign private investment in Nigeria. %"ees and 8a!eem (2010 critically and empirically e#amined the causal linkage between stock market and economic growth in Nigeria between 1'(0 and 200&. The indicator o" the stock market development used are market capitali!ation ratio, total value traded ratio and turnover ratio while the growth rate o" gross domestic product is used as pro#y "or economic growth, using the 1ranger causality (12 test, the empirical evidence obtained "rom the estimation process suggests a bidirectional causality between turnover ratio and economic growth, a uni)directional relationship "rom market

capitali!ation to economic growth and no causal linkage between total value traded. The result o" the causality test is sensitive to the choice o" variable used as pro#y "or stock (capital market. 4verall the result o" the 1.2 test suggested that capital market drive economic growth.

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