Stock market development and economic growth: Evidence from least developed countries
AbstractPurpose â€“ The objective of this paper is to examine the impact of stock market development on economic growth for a sample of least developed countries. Design/methodology/approach â€“ A panel of 10 countries for the period 1995 to 2009 was used. Taking into account the possible existence of endogeneity in stock market-growth modelling, the study considers both static and dynamic panel data estimates. Econometric analysis is based on estimation of a dynamic panel model with GMM estimators which in fact proves the presence of dynamism in the model. Findings â€“ The results show an overall insignificant relationship between stock market development and economic growth for least developed countries. However, the results show that banking development and education are the main factors contributing towards growth of these economies. In particular, these results can be explained by the fact that these economies are mostly banking oriented and that their stock markets are relatively young. Originality/value â€“Relationship between stock market development and economic growth has been of a major concern among academics, policy makers and economists around the world in the recent decades. The importance of stock market development has been analysed empirically quite extensively, but conclusions on such importance varied across different studies. The paper attempts to fill the research gap in the existing literature underlining the impact of financial market development on economic growth in least developed countries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Hochschule fuer Technik und Wirtschaft, Berlin in its series Competence Centre on Money, Trade, Finance and Development with number 1205.
Length: 23 pages
Date of creation: Jul 2012
Date of revision:
Publication status: Published in Berlin Working Papers on Money, Finance, Trade and Development, July 2012
Contact details of provider:
Web page: http://finance-and-trade.htw-berlin.de
working paper; daadpartnership; finance-and-trade;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Valeriano F. García & Lin Liu, 1999. "Macroeconomic Determinants of Stock Market Development," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 29-59, May.
- Klaus Neusser & Maurice Kugler, 1998. "Manufacturing Growth And Financial Development: Evidence From Oecd Countries," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 638-646, November.
- Levine, Ross & Zervos, Sara, 1996.
"Stock market development and long-run growth,"
Policy Research Working Paper Series
1582, The World Bank.
- Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
- Bencivenga, Valerie R & Smith, Bruce D, 1991.
"Financial Intermediation and Endogenous Growth,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 195-209, April.
- Blundell, R. & Bond, S., 1995.
"Initial Conditions and Moment Restrictions in Dynamic Panel Data Models,"
104, Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Charles Komla Adjasi & Charles Amo Yartey, 2007. "Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges," IMF Working Papers 07/209, International Monetary Fund.
- Allen, Franklin & Gale, Douglas, 1999.
"Diversity of Opinion and Financing of New Technologies,"
Journal of Financial Intermediation,
Elsevier, vol. 8(1-2), pages 68-89, January.
- Franklin Allen & Douglas Gale, 1999. "Diversity of Opinion and Financing of New Technologies," Center for Financial Institutions Working Papers 98-30, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Allen, Franklin & Gale, Douglas, 1998. "Diversity of Opinion and Financing of New Technologies," Working Papers 98-29, C.V. Starr Center for Applied Economics, New York University.
- Obstfeld, Maurice, 1992.
"Risk-Taking, Global Diversification, and Growth,"
CEPR Discussion Papers
688, C.E.P.R. Discussion Papers.
- Maurice Obstfeld., 1993. "Risk-Taking, Global Diversification, and Growth," Center for International and Development Economics Research (CIDER) Working Papers C93-016, University of California at Berkeley.
- Maurice Obstfeld, 1992. "Risk-taking, global diversification, and growth," Discussion Paper / Institute for Empirical Macroeconomics 61, Federal Reserve Bank of Minneapolis.
- Maurice Obstfeld, 1995. "Risk-Taking, Global Diversification, and Growth," NBER Working Papers 4093, National Bureau of Economic Research, Inc.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2000.
"Funding growth in bank-based and market-based financial systems : evidence from firm level data,"
Policy Research Working Paper Series
2432, The World Bank.
- Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Funding growth in bank-based and market-based financial systems: evidence from firm-level data," Journal of Financial Economics, Elsevier, vol. 65(3), pages 337-363, September.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Peter L. Rousseau & Paul Wachtel, 1998.
"Equity Markets and Growth: Cross-Country Evidence on Timing and Outcomes, 1980-1995,"
98-09, New York University, Leonard N. Stern School of Business, Department of Economics.
- Rousseau, P. L. & Wachtel, P., 2000. "Equity markets and growth: Cross-country evidence on timing and outcomes, 1980-1995," Journal of Banking & Finance, Elsevier, vol. 24(12), pages 1933-1957, December.
- Charles Adjasi & Nicholas Biekpe, 2006. "Stock Market Development and Economic Growth: The Case of Selected African Countries," African Development Review, African Development Bank, vol. 18(1), pages 144-161.
- Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-52, May.
- Naceur, Samy Ben & Ghazouani, Samir, 2007. "Stock markets, banks, and economic growth: Empirical evidence from the MENA region," Research in International Business and Finance, Elsevier, vol. 21(2), pages 297-315, June.
- Levine, Ross, 1991. " Stock Markets, Growth, and Tax Policy," Journal of Finance, American Finance Association, vol. 46(4), pages 1445-65, September.
- Maurice Obstfeld, 2009. "International Finance and Growth in Developing Countries: What Have We Learned?," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 63-111, April.
- Erik R. Sirri & Peter Tufano, 1998. "Costly Search and Mutual Fund Flows," Journal of Finance, American Finance Association, vol. 53(5), pages 1589-1622, October.
- Diamond, Douglas W & Verrecchia, Robert E, 1982. " Optimal Managerial Contracts and Equilibrium Security Prices," Journal of Finance, American Finance Association, vol. 37(2), pages 275-87, May.
- Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
- Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, January.
- Sarkar, Prabirjit, 2006. "Stock Market Development, Capital Accumulation and Growth in India since 1950," MPRA Paper 5050, University Library of Munich, Germany.
- Bencivenga Valerie R. & Smith Bruce D. & Starr Ross M., 1995. "Transactions Costs, Technological Choice, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 67(1), pages 153-177, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Dr. Sebastian Dullien).
If references are entirely missing, you can add them using this form.