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Causal nexus between economic growth, inflation, and stock market development: The case of OECD countries

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  • Pradhan, Rudra P.
  • Arvin, Mak B.
  • Bahmani, Sahar

Abstract

This paper investigates cointegration relationships and Granger causality nexus in a trivariate framework among economic growth, inflation, and stock market development. Utilizing three measures of stock market development and employing a panel vector autoregressive model, we study 34 OECD countries over the time period of 1960–2012. Our novel panel-data estimation method allows us to identify important causal links between the variables both in the short run and in the long run.

Suggested Citation

  • Pradhan, Rudra P. & Arvin, Mak B. & Bahmani, Sahar, 2015. "Causal nexus between economic growth, inflation, and stock market development: The case of OECD countries," Global Finance Journal, Elsevier, vol. 27(C), pages 98-111.
    • Handle: RePEc:eee:glofin:v:27:y:2015:i:c:p:98-111
    DOI: 10.1016/j.gfj.2015.04.006
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    More about this item

    Keywords

    Inflation; Stock market development; Economic growth; Panel-VAR; Granger causality; OECD countries;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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