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Stock Market Development and Long-Run Growth

  • Levine, Ross
  • Zervos, Sara

Is the financial system important for economic growth? One line of research argues that it is not; another line stresses the importance of the financial system in mobilizing savings, allocating capital, exerting corporate control, and easing risk management. Moreover, some theories provide a conceptual basis for the belief that larger, more efficient stock markets boost economic growth. This article examines whether there is a strong empirical association between stock market development and long-run economic growth. Cross-country growth regressions suggest that the predetermined component of stock market development is positively and robustly associated with long-run economic growth. Copyright 1996 by Oxford University Press.

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Article provided by World Bank Group in its journal World Bank Economic Review.

Volume (Year): 10 (1996)
Issue (Month): 2 (May)
Pages: 323-39

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Handle: RePEc:oup:wbecrv:v:10:y:1996:i:2:p:323-39
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  1. Michael B. Devereux & Gregor W. Smith, 1991. "International Risk Sharing and Economic Growth," Working Papers 829, Queen's University, Department of Economics.
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  9. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
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  18. repec:fth:wobaco:1083 is not listed on IDEAS
  19. Levine, Ross & Zervos, Sara, 1993. "Looking at the facts : what we know about policy and growth from cross-country analysis," Policy Research Working Paper Series 1115, The World Bank.
  20. Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Market Development and Financial Intermediaries: Stylized Facts," World Bank Economic Review, World Bank Group, vol. 10(2), pages 291-321, May.
  21. Levine, Ross & Zervos, Sara J, 1993. "What We Have Learned about Policy and Growth from Cross-Country Regressions?," American Economic Review, American Economic Association, vol. 83(2), pages 426-30, May.
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