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Capital Accumulation in Less Developed Countries: Does Stock Market Matter?

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  • Sarkar, Prabirjit

Abstract

Our panel data analysis (1988-2002) of a sample of 31 less developed countries (LDCs) shows that the stock market capitalization as a percentage of GDP- an important indicator of stock market development- has no relationship with the growth rates of gross fixed capital formation (GGKF). Our time series analysis (1976-2002) of 16 LDCs shows that in 11 cases there is no meaningful relationship between the stock market turnover ratio and the growth of capital accumulation (GGKF). For 5 LDCs (belonging to the so-called French-origin civil law category) with low shareholder protection we get a positive long-term relationship.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5053.

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Date of creation: 05 Jul 2007
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Handle: RePEc:pra:mprapa:5053

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Keywords: stock market; capital accumulation; growth; and liberalisation;

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References

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  1. Priya P. Lele & Mathias M. Siems, 2007. "Shareholder Protection: A Leximetric Approach," Money Macro and Finance (MMF) Research Group Conference 2006 170, Money Macro and Finance Research Group.
  2. Arestis, Philip & Demetriades, Panicos O & Luintel, Kul B, 2001. "Financial Development and Economic Growth: The Role of Stock Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 16-41, February.
  3. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  4. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2001. "Does Financial Liberalization Spur Growth?," NBER Working Papers 8245, National Bureau of Economic Research, Inc.
  5. Editor, 2007. "Contents," The Journal of Comparative Economic Studies (JCES), The Japanese Society for Comparative Economic Studies (JSCES), vol. 3, pages 0-0, December.
  6. Ajit Singh, 1998. "Financial liberalisation, stockmarkets and economic development," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 8(1), pages 165-182.
  7. Levine, Ross, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
  8. Levine, Ross & Zervos, Sara, 1996. "Stock markets, banks, and economic growth," Policy Research Working Paper Series 1690, The World Bank.
  9. Simeon Djankov & Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2005. "The Law and Economics of Self-Dealing," NBER Working Papers 11883, National Bureau of Economic Research, Inc.
  10. Sonja Fagernas & Prabirjit Sarkar & Ajit Singh, 2007. "Legal Origin, Shareholder Protection and the Stock Market: New Challenges from Time Series Analysis," WEF Working Papers 0023, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  11. Henry, Peter Blair, 2000. "Do stock market liberalizations cause investment booms?," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 301-334.
  12. Sarkar, Prabirjit, 2007. "Stock Market Development and Capital Accumulation: Does Law Matter? A Case Study of India," MPRA Paper 5052, University Library of Munich, Germany.
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Cited by:
  1. Parmendra Sharma & Eduardo Roca, 2011. "Re–Designing Financial Systems: A Review of the Role of Stock Markets in Developing Economies," Discussion Papers in Finance finance:201120, Griffith University, Department of Accounting, Finance and Economics.
  2. Misati, Roseline Nyakerario & Nyamongo, Esman Morekwa, 2011. "Financial development and private investment in Sub-Saharan Africa," Journal of Economics and Business, Elsevier, vol. 63(2), pages 139-151, March.

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