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Stock and credit market expansion and economic development in emerging markets: further evidence utilizing cointegration analysis

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  • Konstantinos Kassimatis
  • Spyros Spyrou

Abstract

This paper empirically investigates the relationship between equity and credit market development and economic growth, in a sample of five very important 'emerging' markets. In particular, employing a multivariate time-series methodology to test for long-run trends and causality between variables that proxy for stock market development, credit market development and economic development. The results seem to suggest that equity markets have a role to play only in relatively liberalized economies, like Chile and Mexico. In financially repressed economies, like India, the equity market does not affect real sector growth. Furthermore, the banking crises in the 1980s and 1990s in Chile and Mexico resulted in a negative relation between economic growth and the credit market. In South Korea, equity and credit markets both affect economic growth, but not vice versa. In countries where the nature of the stock market has been speculative, like Taiwan, a negative relationship is detected between equity market development and economic development.

Suggested Citation

  • Konstantinos Kassimatis & Spyros Spyrou, 2001. "Stock and credit market expansion and economic development in emerging markets: further evidence utilizing cointegration analysis," Applied Economics, Taylor & Francis Journals, vol. 33(8), pages 1057-1064.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:8:p:1057-1064
    DOI: 10.1080/00036840121750
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    Citations

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    Cited by:

    1. Castaneda, Gonzalo, 2006. "Economic growth and concentrated ownership in stock markets," Journal of Economic Behavior & Organization, Elsevier, vol. 59(2), pages 249-286, February.
    2. Natalia Utrero-Gonzalez, 2007. "Banking regulation, information asymmetries and industry growth: new evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 17(1), pages 63-76.
    3. Dzmitry Kruk & Kiryl Haiduk, 2013. "The Outcome of Directed Lending in Belarus: Mitigating Recession or Dampening Long-Run Growth?," BEROC Working Paper Series 22, Belarusian Economic Research and Outreach Center (BEROC).
    4. Rousseau, Peter L. & Xiao, Sheng, 2007. "Banks, stock markets, and China's `great leap forward'," Emerging Markets Review, Elsevier, vol. 8(3), pages 206-217, September.
    5. Takashi Fukuda & Jauhari Dahalan, 2012. "Finance-Growth-Crisis Nexus in Asian Emerging Economies: Evidence from VECM and ARDL Assessment," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 5(2), pages 69-100, August.
    6. Abeyratna Gunasekarage & Anirut Pisedtasalasai & David M. Power, 2004. "Macroeconomic Influence on the Stock Market: Evidence from an Emerging Market in South Asia," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 3(3), pages 285-304, December.
    7. Fukuda, Takashi, 2015. "Evidence of Korea’s Finance-Growth Nexus: VARX Analysis with Financial Crisis and Openness," MPRA Paper 98787, University Library of Munich, Germany.
    8. M Cruz, 2003. "A Minskyian Crisis: An Application to the 1994-95 Mexican Experience," Economics Discussion Paper Series 0325, Economics, The University of Manchester.
    9. Indrani Chakraborty, 2010. "Financial Development and Economic Growth in India," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 11(2), pages 287-308, September.
    10. Christie Dike, 2016. "Stock Market Efficiency Promotes Economic Development: Empirical Evidence from Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1287-1298.
    11. Takashi Fukuda, 2016. "South Korea’s finance--growth nexus: evidence from VARX analysis with financial crisis and openness," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 9(1), pages 18-33, March.

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