Financial Development and Economic Growth in South Africa

This study examines the relationship between stock market growth and economic development in South Africa from 1980–2020. Using the Automatic Distributed Lag (ARDL) technique and bounded testing, the study finds that foreign direct investment (FDI) contributes to the South African economy and has a moderating effect. The research suggests the need for laws to maintain inflation at a constant level, allowing investors to use the stock market as a hedge against inflation, thereby boosting investment in the stock market as a whole. This highlights the importance of financial instruments in achieving rapid economic development.