British Journal of Economics, Finance and Management Sciences 122 March 2016, Vol. 11 (1) © 2016 British Journals ISSN 2048-125X Investigating the Nexus between Stock Exchange and Economic Growth in Ghana Grace Ofori-Abebrese 1 , Kofi Kamasa 2 , and Robert Becker Pickson 3 1 Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi-Ghana; ofori35@yahoo.com 2 Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi- Ghana; kofikamasa@hotmail.co.uk 3 Research and Consultancy Center, University of Professional Studies, Accra-Ghana; myselfpickson@yahoo.com Abstract This study used ARDL model coupled with granger causality test to investigate the relationship between stock market development and economic growth in Ghana for the period from 1991 to 2011. The study revealed that stock market development has a negative impact on economic growth in the long-run and this was confirmed by the causality test that there do not exist any relationship between stock market development and economic growth in Ghana for the study period. Human capital and money supply have contributed positively to growth. Inflation and foreign direct investment have not shown to be deterministic variables to growth of the economy. The study concluded that operators of Ghana Stock Exchange should strategise well to attract more investors to the Stock Exchange. In addition, the independence of the Central Bank, further development of financial and money markets should be adhered to by the Bank of Ghana to facilitate the implementation of monetary policy in order to achieve price stability in the country. Keywords: Stock market development, economic growth, human capital, inflation, money supply, foreign direct investment. 1. INTRODUCTION Stock markets in Africa are developing rapidly, although most of them are still immature and trading occurs in only a few stocks which account for a considerable part of the total market capitalization. Beyond these actively traded shares, there are serious informational and disclosure deficiencies for other stocks. Further, supervision by regulatory authorities is often far from adequate. Ghana reformed its economy in 1983–1986 under World Bank/IMF programme. As part of the reforms, the Ghana Stock Exchange (GSE) was incorporated as a private company limited by guarantee under the Companies Code of 1963 in July 1989. It was given recognition as an authorized stock exchange under the Stock Exchange Act of 1971 (Act 384) in October 1990 and started trading with 11 listed companies on November 12, 1990. The Exchange went public in April 1994.The Ghana Stock Exchange currently has 36 listed companies most of which are Ghanaians and 2 corporate bonds. In 1993, the GSE was the sixth best index performing emerging stock market, with a capital appreciation of 116%. In 1994, the GSE index performed well and gained 124.3% in its index level and market size (market capitalisation expressed as a percentage of GDP) was 34.37. It dropped to 25.53 in 1995 when the performance of the market was bad due to high inflation and interest rates. Market size had a continuous decline to 9.93 in 2001 and picked up again to 29.79 in 2004. The Ghana Stock Exchange was adjudged the best in Africa and among the very top performers worldwide in 2008 in the face of global economic recession and its effects on capital markets. It was again adjudged the “Most Innovative African Stock Exchange for 2010” at the Africa investor (Ai) prestigious annual Index Series