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The Determinants of Stock Market Development in Emerging Economies

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  • Charles Amo Yartey
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    Abstract

    This paper examines the institutional and macroeconomic determinants of stock market development using a panel data of 42 emerging economies for the period 1990 to 2004. The paper finds that macroeconomic factors such as income level, gross domestic investment, banking sector development, private capital flows, and stock market liquidity are important determinants of stock market development in emerging market countries. The results also show that political risk, law and order, and bureaucratic quality are important determinants of stock market development because they enhance the viability of external finance. This result suggests that the resolution of political risk can be an important factor in the development of emerging stock markets. The analysis also shows the factors identified above as determining stock market development in emerging economies can also explain the development of the stock market in South Africa.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/32.

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    Length: 31
    Date of creation: 01 Feb 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/32

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    Related research

    Keywords: Stock markets; Emerging markets; Income; Savings; Banking sector; stock market; stock market development; private capital flows; capital flows; stock market liquidity; private capital; stock market capitalization; capitalization ratio; stock exchange; emerging stock markets; capital markets; financial liberalization; foreign capital; capital inflows; bond; financial intermediary development; foreign capital inflows; equity investment; international country risk guide; financial markets; stock returns; financial market; financial intermediaries; stock exchanges; stock transactions; stock market index; global stock market; foreign capital flows; investor confidence; domestic financial liberalization; world stock markets; moral hazard; capital adequacy; private equity funds; financial sector development; options trading; securities exchange; financial sector; domestic credit; financial institutions; hedge; financial services; stock prices; liquid markets; financial structures; financial policies; financial economics; futures exchange; private equity; portfolio investment; financial systems; equity funds; bond market; foreign portfolio investment;

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    References

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    1. 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.
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    Cited by:
    1. Pasali, Selahattin Selsah, 2013. "Where is the cheese ? synthesizing a giant literature on causes and consequences of financial sector development," Policy Research Working Paper Series 6655, The World Bank.
    2. SAIBU, Olufemi Muibi, 2012. "An analysis of causal nexus between foreign direct investment, exchange rate and financial market development in Nigeria (1970 to 2009)," MPRA Paper 42429, University Library of Munich, Germany.
    3. Adam, Anokye M. & Tweneboah, George, 2008. "Foreign Direct Investment and Stock market Development: Ghana’s Evidence," MPRA Paper 11985, University Library of Munich, Germany, revised 2008.

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