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Stock market and economic growth in selected Asian countries

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Author Info

  • Tang, Hong Peng
  • Habibullah, Muzafar Shah
  • Puah, Chin-Hong

Abstract

This study investigates the relationship between stock markets and economic growth in twelve Asian countries from 1980 to 2004. In this study, we utilize the Johansen cointegration and Granger causality tests using quarterly data. Results from cointegration test suggest that there is long run relationship between stock markets and economic growth in four countries namely, China, the Philippines, Singapore and Taiwan. The results of Granger causality test indicate that there is a bi-directional feedback relationship between stock markets and economic growth in China, Hong Kong, Indonesia, Malaysia and Thailand. Whereas in Japan and Korea, we found that there exists a unidirectional short run causal effect running from stock markets to economic growth. On the contrary, we found short run causal effect running from economic growth to stock markets in the case of India and Singapore. In addition, there is no evidence of causality among the variables under study in Sri Lanka.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37649.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:37649

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Related research

Keywords: Stock markets; Economic growth; Asian economies;

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References

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  1. Levine, Ross, 1991. " Stock Markets, Growth, and Tax Policy," Journal of Finance, American Finance Association, vol. 46(4), pages 1445-65, September.
  2. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
  3. Mayer, Colin, 1987. "New Issues in Corporate Finance," CEPR Discussion Papers 181, C.E.P.R. Discussion Papers.
  4. Singh, Ajit & Weisse, Bruce A., 1998. "Emerging stock markets, portfolio capital flows and long-term economie growth: Micro and macroeconomic perspectives," World Development, Elsevier, vol. 26(4), pages 607-622, April.
  5. Levine, Ross & Zervos, Sara, 1996. "Stock markets, banks, and economic growth," Policy Research Working Paper Series 1690, The World Bank.
  6. Guglielmo Maria Caporale & Peter Howells & Alaa M. Soliman, 2005. "Endogenous Growth Models and Stock Market Development: Evidence from Four Countries," Review of Development Economics, Wiley Blackwell, vol. 9(2), pages 166-176, 05.
  7. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  8. Singh, Ajit, 1996. "Financial liberalisation,stockmarkets and economic development," MPRA Paper 53897, University Library of Munich, Germany.
  9. Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, vol. 37(2-3), pages 632-640, April.
  10. Bencivenga, Valerie R & Smith, Bruce D & Starr, Ross M, 1996. "Equity Markets, Transactions Costs, and Capital Accumulation: An Illustration," World Bank Economic Review, World Bank Group, vol. 10(2), pages 241-65, May.
  11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  12. Chee Keong Choong & Zulkornain Yusop & Siong Hook Law & Venus Liew Khim Sen, 2003. "Financial Development and Economic Growth in Malaysia: The Stock Market Perspective," Macroeconomics 0307010, EconWPA.
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Cited by:
  1. Esteban Gómez & Andrés Murcia Pabón & Nancy Zamudio Gómez, . "Foreign Debt Flows and Domestic Credit: A Principal-Agent Approach," Temas de Estabilidad Financiera 075, Banco de la Republica de Colombia.

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