Macroeconomic Determinants of Stock Market Performance in Ghana: Evidence from an ARDL Approach

This study investigates the impact of selected macroeconomic variables on the performance of the Ghana Stock Exchange (GSE) using annual data from 1990 to 2012. The analysis employs the Autoregressive Distributed Lag (ARDL) bounds testing approach to examine both the long-run and short-run dynamics between the GSE All Share Index and five key macroeconomic indicators: real interest rate, inflation, money supply, exchange rate, and real GDP. The results indicate that in the long run, inflation, exchange rate, and real GDP exert significant negative effects on stock market performance, while money supply exerts a statistically insignificant but positive effect. In the short run, inflation and exchange rate remain significant, with real interest rate and money supply contributing marginally. The error correction term is negative and statistically significant, confirming stable adjustment to long-run equilibrium. These findings highlight the importance of maintaining macroeconomic stability to foster investor confidence and long-term capital market development in Ghana.