The paper examines the causal relationship between stock market development and
economic growth in South Africa while controlling for the effect of banking variable. It
applies vector error correction model (VECM), generalized impulse response function
(GIRF) and variance decomposition (VDC). In the long-run, the finding suggests evidence
of bidirectional causality between financial development and economic growth using bank
credit to private sector (BCP). When stock market variables are used, turnover ratio (TR)
and value of shares traded (VT); both indicate unidirectional causality from economic
growth to stock market development. The generalized Impulse response function and
variance decomposition indicate that financial development contains some useful
information in predicting the future path of economic growth.