The study by muhammad et al 2008 suggested that there is a longrun relationship between stock market. Stock market development and longrun growth english the. Stock market development and financial intermediaries. It is measured as the percentage rate change in the real gross domestic product gdp. Stock markets, financial development and economic growth in. First, it constructs more measures or criteria of stock market development than any previous study. The authors also reported that stock market development grangercauses economic growth. The authors empirically evaluate the relationship between stock market development and long term growth. Stock market development and longrun growth econpapers. Stock market development and longrun growth the world bank. This paper examines the impact of stock market development on growth in west african monetary union. The second group of studies did not find a significant relationship between stock market development and economic growth e. The study empirically assessed the relationship between stock market development and longrun economic growth in nigeria for the period 1980 to 2000.
The results are inconsistent with theories that predict no correlation or a negative association between stock market development and economic performance. G00, g10, o40, o41 1 introduction finance a ects the real economy in several ways, hence understanding the mechanisms through which it impacts on economic growth is essential in order to derive policy recommendations levine, 2005. Demirgiickunt and maksimovic 1996 and levine and zervos 1996 use these indexes to examine the empirical relationship among stock market. Can stock market development boost economic growth. Stock market development has been the subject of intensive theoretical and empirical studies. Demirguckunt and levine 1996 identified three possible channels through which this effect may propagate. Stock market development and longrun growth by sara zervos. Finance, financial sector policies, and longrun growth. The study by muhammad et al 2008 suggested that there is a long run relationship between stock market development and economic growth.
The granger causality analysis deduced that economic growth of south africa is significantly affected by market capitalization but not so in nigeria. Stock markets, financial development and economic growth. A time series econometric investigation is conducted over the period 1989 20067. In general, this study examines the stock market, financial development and economic growth in selected subsahara african countries. The rest of this section presents and discusses an array of stock market devel. Financial development and growth in the short and long run raymond fisman, inessa love. Stock prices and gdp in the long run annika alexius. More recently, the emphasis has increasingly shifted to stock market indicators and the effect of stock markets on economic development. Stock market development was found to be an important factor that. An assessment of nigerian stock exchange market development. First, a higher rate of return on stock market will encourage investment as more.
Procedia economics and finance 3 2012 438 a 444 22126716 2012 the authors. The surprising result was contrary to expectations the correlation between stock returns and economic growth across. Empirically, chapter two of the study used generalised method of moment gmm dynamic instrumental variable approach to investigate financial development and economic growth nexus in the east african countries. Financial development and growth in the short and long run.
While crosscountry regressions imply a strong link between stock market development and economic growth, the results should. Theory also provides conflicting predictions about. Finance, financial sector policies, and longrun growth english abstract. Crosscountry growth regressions suffer from measurement, statistical, and conceptual problems. A time series econometric investigation is conducted over the period 1995 2006. Moreover, instrumental variables procedures indicate a strong connection between the predetermined component in the long run.
Questions were raised whether stock market development causes economic growth taking into account the negative effect of interest rate on stock market development. Yet, there exists very little hard empirical evidence on the importance of stock markets development to longrun economic growth and almost none exists. The data suggest that stock market development is positively associated with economic growth. Stock market development and longrun growth by sara. Financial innovation, stock market development, and. Stock market development and longrun economic growth conclusao quadro te orico m etodo tamanho, liquidez e integra. We analyze both the short run and long run relationship by constructing an ecm. Financial development, economic growth, transitional dynamics jel classi cation. Stock market development and long run growth english abstract. Stock market development and economic growth in sri lanka. On the other hand, stock market development has a significant effect on economic growth on shortrun.
Is the financial system important for economic growth. Stock market development and longrun growth oxford. They omit measures of stock market development because measures of stock market development for a twentyyear period are only available for about 40 countries. Pdf foreign direct investment, stock market development. Two measures of stock market development namely size and liquidity are used. Stock market volatility and economic growth in nigeria. Sep 23, 2008 the study empirically assessed the relationship between stock market development and long run economic growth in nigeria for the period 1980 to 2000. Evidence from selected subsaharan africa ssa countries from 1984 to 2015. Introduction the relationship between financial sector development and real economic activity has been a debatable issue in theoretical and empirical research. Stock markets, corporate finance, and economic growth. Stock market development and longrun growth english. While crosscountry regressions imply a strong link between stock market development and economic growth, the results should be viewed as suggestive partial correlations. Pdf stock market development and longrun growth semantic. This article examines whether there is a strong empirical association between stock market development and longrun economic growth.
In general equilibrium, output, consumption, labour in. Macroeconomic indicators and their impact on stock market. Stock market development and longrun growth the world. Stock market development and longrun growth english abstract. We make use of a johansenbased panel cointegration methodology allowing for crosscountry dependence to test the number of cointegrating vectors among these three variables for 5 developing countries. The authors empirically evaluate the relationship between stock market development and longterm growth. The volatility measures of stock market returns in nigeria from 1980 to the first quarter of 2010 is presented in figure 1. More recently, the emphasis has increasingly shifted to stock market indicators and. The aim of this paper is to investigate the long run relationship between the development of banks and stock markets and economic growth. Stock market development and longrun growth ebook, 1996.
Stock markets banks, analysis of a panel data set for and growth. Stock markets banks, analysis of a panel data set for and growth 197698 shows that on balance stock markets and. Citations of stock market development and longrun growth. In both short and long run, there was a positive but insignificant relationship between stock market development and economic growth in nigeria and south africa. Economic growth is the increase in the market value of the goods and services that an. The link between openness and longrun economic growth. An empirical analysis of stock market performance and. While crosscountry regressions imply a strong link between stock. The results are inconsistent with theories that predict no correlation or a negative association between stock market. This study examined the effect of foreign direct investments fdi on stock market development smd and longrun growth. This article examines whether there is a strong empirical association between stock market development and long run economic growth. Stock market volatility and economic growth in nigeria 1980.
Empirically, chapter two of the study used generalised method. Long run growth is defined as the sustained rise in the quantity of goods and services that an economy produces. Longrun growth is defined as the sustained rise in the quantity of goods and services that an economy produces. Using the cointegration and causality tests for the period june 1991 to june 20, the study confirms a well defined long run equilibrium relationship between the stock market development indicators and. On the other hand, stock market development has a significant effect on economic growth on short run. Zhao examines the relationship between stock returns and economic growth in china. Financial innovation, stock market development, and economic. Crosscountry growth regressions suggest that the predetermined. Crosscountry growth regressions suggest that the predetermined component of stock market development is positively and robustly associated with longrun economic growth. The data suggest that stock market development is positively associated with economic. Pdf stock market development and economic growth an. Stock market development and longrun growth in nigeria.
Stock market development and economic growth in india. Demirgiickunt and maksimovic 1996 and levine and zervos 1996 use these indexes to examine the empirical relationship among stock market development, firms financing decisions, and long run economic growth. Stock markets banks, analysis of a panel data set for and. Dec 10, 20 the aim of this paper is to investigate the long run relationship between the development of banks and stock markets and economic growth.
G00, g10, o40, o41 1 introduction finance a ects the real economy in several ways, hence. No 1582, policy research working paper series from the world bank. Stock market development and economic growth springerlink. In general, the literature indicates that longrun growth is positively associated with. Moreover, instrumental variables procedures indicate a strong connection between the predetermined component of stock market development and economic growth in the long run. Moreover, instrumental variables procedures indicate. The link between openness and longrun economic growth web version. Pdf stock market development and longrun economic growth. The link between stock market development and economic activity has always been the subject of considerable debate in the field of economics and it raises empirical question whether stock market. In general, the literature indicates that long run growth is positively associated with the development of stock markets e. Dec, 2017 in both short and long run, there was a positive but insignificant relationship between stock market development and economic growth in nigeria and south africa. Stock market performance, economic growth, causality test, short run and long run dynamics 1. No 1582, policy research working paper series from the world bank abstract. First, it constructs more measures or criteria of stock market.
This study examined the effect of foreign direct investments fdi on stock market development smd and long run growth. Theory provides ambiguous predictions concerning the question of whether financial development exerts a positive, causative impact on longrun economic growth. Is there a link between gdp growth and equity returns. The second group of studies did not find a significant relationship between stock market development. Pdf foreign direct investment, stock market development and. Economic growth is the increase in the market value of the goods and services that an economy produces over time. This paper examines the long run and causal relationship between stock market development and economic growth. While crosscountry regressions imply a strong link. However, it can be argued that the liquidity created by stock market may also have negative impact on the long run economic growth in the real economy. Crosscountry growth regressions suggest that the predetermined component of stock market development is positively and robustly associated with long run economic growth.
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