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Does opening a stock exchange increase economic growth?

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  • Baier, Scott L.
  • Dwyer, Gerald Jr.
  • Tamura, Robert

Abstract

We examine the connection between the creation of stock exchanges and economic growth with a new set of data on economic growth that spans a longer time period than generally available. We find that economic growth increases relative to the rest of the world after a stock exchange opens. Our evidence indicates that increased growth of productivity is the primary way that a stock exchange increases the growth rate of output, rather than an increase in the growth rate of physical capital. We also find that financial deepening is rapid before the creation of a stock exchange and slower subsequently.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 23 (2004)
Issue (Month): 3 (April)
Pages: 311-331

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Handle: RePEc:eee:jimfin:v:23:y:2004:i:3:p:311-331

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Web page: http://www.elsevier.com/locate/inca/30443

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  1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
  2. Bencivenga, Valerie R & Smith, Bruce D, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 195-209, April.
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  5. Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad, 2003. "Equity Market Liberalization in Emerging Markets," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(3), pages 275-299.
  6. Summers, Robert & Heston, Alan, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 327-68, May.
  7. Paul Wachtel, 2003. "How much do we really know about growth and finance?," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 33-47.
  8. Matthew J. Clayton & Bjorn N. Jorgensen & Kenneth A. Kavajecz, 1999. "On the Formation and Structure of International Exchanges," New York University, Leonard N. Stern School Finance Department Working Paper Seires, New York University, Leonard N. Stern School of Business- 99-057, New York University, Leonard N. Stern School of Business-.
  9. Barro, Robert J, 1999. " Notes on Growth Accounting," Journal of Economic Growth, Springer, vol. 4(2), pages 119-37, June.
  10. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  11. Pirrong, Craig, 2000. "A Theory of Financial Exchange Organization," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 437-71, October.
  12. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
  13. Scott L. Baier & Gerald P. Dwyer, Jr. & Robert Tamura, 2002. "How important are capital and total factor productivity for economic growth?," Working Paper, Federal Reserve Bank of Atlanta 2002-2, Federal Reserve Bank of Atlanta.
  14. Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, vol. 37(2-3), pages 632-640, April.
  15. Scott L. Baier & Gerald P. Dwyer, Jr. & Robert Tamura, 2003. "Modern economic growth and recent stagnation," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 45-62.
  16. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
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Cited by:
  1. Koetter, Michael & Wedow, Michael, 2005. "Finance and growth in a bank-based economy: is it quantity or quality that matters?," Discussion Paper Series 2: Banking and Financial Studies 2006,02, Deutsche Bundesbank, Research Centre.
  2. Lucarelli, Caterina & Palomba, Giulio, 2007. "Investors’ behaviour in the Chinese Stock Exchanges: Empirical Evidence in a Systemic Approach," MPRA Paper 7034, University Library of Munich, Germany.
  3. Muhammad, Shahbaz, 2011. "Electricity Consumption, Financial Development and Economic Growth Nexus: A Revisit Study of Their Causality in Pakistan," MPRA Paper 35588, University Library of Munich, Germany, revised 27 Dec 2011.
  4. Ferreira, Miguel A. & Laux, Paul A., 2009. "Portfolio flows, volatility and growth," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(2), pages 271-292, March.
  5. Najeb Masoud, 2013. "Neoclassical Economic Growth Theory: An Empirical Approach," Far East Journal of Psychology and Business, Far East Research Centre, Far East Research Centre, vol. 11(2), pages 10-33, June.
  6. Chase Parker DeHan, 2012. "Stock Markets and Growth: A Re-Evaluation," Working Paper Series, Department of Economics, University of Utah, University of Utah, Department of Economics dehan_2012_08, University of Utah, Department of Economics.
  7. Muhammad, Shahbaz & Lean, Hooi Hooi, 2011. "Does Financial Development Increase Energy Consumption? Role of Industrialization and Urbanization in Tunisia," MPRA Paper 33194, University Library of Munich, Germany, revised 06 Sep 2011.
  8. Sadorsky, Perry, 2010. "The impact of financial development on energy consumption in emerging economies," Energy Policy, Elsevier, vol. 38(5), pages 2528-2535, May.
  9. Fung, Michael K., 2009. "Financial development and economic growth: Convergence or divergence?," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(1), pages 56-67, February.

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