This paper explores the intricate relationships among liquidity, subsidies and savings in Sub-Saharan Africa (SSA), underscoring their crucial roles in fostering economic stability and enhancing market performance. Employing a Panel VAR model, the findings reveal that bank liquidity significantly influences stock market returns, thereby emphasizing the necessity of maintaining adequate liquidity reserves to support lending and stimulate economic activity. While the analysis suggests that subsidies can enhance liquidity under favourable conditions, it also warns against over-reliance on such interventions, which may induce market distortions and inefficiencies. The relationship between gross savings and liquidity is multifaceted; although higher savings may initially curtail consumption, they ultimately serve as vital capital for investment and strengthen economic resilience. This study advocates for a comprehensive policy framework that includes establishing targeted subsidy programs, promoting a savings-oriented culture, and improving bank liquidity management. By prioritizing strategic government spending and investing in infrastructure, SSA countries can create a more stable economic environment that encourages sustainable growth and boosts investor confidence. Ultimately, these recommendations aim to enhance liquidity, stabilize credit markets, and support the long-term economic development of the region.

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Keywords

Bank Liquidity, Economic Resilience, Panel VAR Model, Stock Market Returns, Strategic Government Spending