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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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