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