Rethinking the Nexus Between Stock Market Development and Macroeconomic Factors: An Analysis on Türkiye

The investigation of the relationship between economic growth and financial development began with Walter Bagehot's work in 1873. Although research on the relationship between the two variables later focused on financial development in the context of stock or capital markets, the pertinent literature was also separated into two categories: supply-leading hypothesis and demand-following hypothesis. Using yearly data for the years 1993–2022, this study aims to empirically measure the impact of real gross domestic product per capita and the proportion of total savings in gross domestic product on stock market development for case of Türkiye. The demand-following hypothesis forms the basis of the investigation in this regard. Both short-term and long-term empirical relationships between variables were analyzed using the error correction model and ARDL bounds testing. According to the empirical findings, the stock markets development is not statistically impacted over the long term by the amount of real gross domestic product per capita or the proportion of savings in gross domestic product. The proportion of savings in gross domestic product, on the other hand, has a negative, albeit significant, impact on stock markets development in the short term, whereas the level of real gross domestic product per capita has a positive and significant impact.