IJEBM

ISSN: 2384-6151

 International Journal of Economic and Business Management
 

Vol. 8(5), pp. 47-53, September, 2020.

ISSN: 2384-6151

DOI: 10.14662/IJEBM2020.100

Full Length Research

The Effect of Inflation on Capital Market Performance in Ghana

¹David Mensah Awadzie and ²David Kwashie Garr

¹Accra Institute of Technology, Accra Ghana. Corresponding author’s E-mail: davidawadzie@gmail.com

²Presbyterian University College, Ghana. E-mail: davidgarr2003@yahoo.com

Accepted 7 September 2020

The securities exchange is a financial organization that encourages investment in the stock of organizations recorded the development and advancement of the economy of a country. The purpose of the study is to investigate the effect of inflation on the stock market performance using data on the Ghana Stock Exchange. The study focused on the impact of inflation rate fluctuation on the stock market performance of the Ghana Stock Exchange. The study used secondary annual time series data for the thirty years from 1990 to 2018. Ordinary least squares (OLS) regression analysis was employed to evaluate the relationship between inflation rate and capital market measures such as market capitalization, the total value of shares, the market volume of shares and market turnover ratio. The result shows the following impact of inflation rate on market performance measures respectively; 24.57%,18.97%,13.34% and 1.71%. The result also revealed a negative relationship between inflation and market performance measures, except for market turnover ratio that exhibited a deviation from a priori expectation as it indicated a positive correlation between inflation and market turnover ratio. We further concluded that there is a negative relationship between inflation and capital market performance which is in agreement with the finding by Usman and Adejare (2013). The study further suggests that more emphasis should be placed on reducing inflation to encourage investors to invest more in the stock market hence making available long – term funds for developmental projects.

Key Words: Stock Market Performance, Value of shares traded, volume of shares traded, turnover ratio and market capitalization, Inflation, Regression Model, Ghana Stock Exchange

Cite This Article As: Awadzie DM., Garr DK (2020). The Effect of Inflation on Capital Market Performance in Ghana. Inter. J. Econ. Bus. Manage. 8(5): 47-53