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Stock Market Liquidity and Economic Growth: a Critical Appraisal of the Levine/Zervos Model

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  • Andong Zhu
  • Michael Ash
  • Robert Pollin
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    Abstract

    Levine & Zervos (1998) presented cross-country econometric evidence showing that, in a sample of 47 countries, stock market liquidity contributed a significant positive influence on GDP growth between 1976-93. We show that the Levine-Zervos results are not robust to alternative specifications because of the incomplete manner in which they control for outliers in their data. We show that when one properly controls for outliers, stock market liquidity no longer exerts any statistically observable influence on GDP growth.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

    Volume (Year): 18 (2004)
    Issue (Month): 1 ()
    Pages: 1-8

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    Handle: RePEc:taf:irapec:v:18:y:2004:i:1:p:1-8

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    Keywords: Stock market; economic growth;

    References

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    1. Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, vol. 37(2-3), pages 632-640, April.
    2. Panicos O. Demetriades & Philip Arestis, 1996. "Financial Development and Economic Growth: Assessing the Evidence," Keele Department of Economics Discussion Papers (1995-2001) 96/16, Department of Economics, Keele University.
    3. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
    4. Philip Arestis & Panicos O. Demetriades & Kul B. Luintel, 1997. "Financial Development and Economic Growth: the Role of Stock Markets," Keele Department of Economics Discussion Papers (1995-2001) 97/05, Department of Economics, Keele University.
    5. Harris, Richard D. F., 1997. "Stock markets and development: A re-assessment," European Economic Review, Elsevier, vol. 41(1), pages 139-146, January.
    6. Ross Levine, 2003. "More on finance and growth: more finance, more growth?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 31-46.
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    Cited by:
    1. Ikonen, Pasi, 2010. "Effect of finance on growth through more efficient utilization of technological innovations," Research Discussion Papers 21/2010, Bank of Finland.
    2. Andini, Monica & Andini, Corrado, 2014. "Finance, growth and quantile parameter heterogeneity," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 308-322.
    3. Zaiter Lahimer, Mahjouba, 2011. "L’impact des entrées de capitaux privés sur la croissance économique dans les pays en développement," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/7670 edited by Sterdyniak, Henri, November.

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