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Stock Market Liquidity and Economic Growth: a Critical Appraisal of the Levine/Zervos Model

  • Andong Zhu
  • Michael Ash
  • Robert Pollin
Registered author(s):

    Levine & Zervos (1998) presented cross-country econometric evidence showing that, in a sample of 47 countries, stock market liquidity contributed a significant positive influence on GDP growth between 1976-93. We show that the Levine-Zervos results are not robust to alternative specifications because of the incomplete manner in which they control for outliers in their data. We show that when one properly controls for outliers, stock market liquidity no longer exerts any statistically observable influence on GDP growth.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/0269217032000148645
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    Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

    Volume (Year): 18 (2004)
    Issue (Month): 1 ()
    Pages: 1-8

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    Handle: RePEc:taf:irapec:v:18:y:2004:i:1:p:1-8
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    1. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
    2. Philip Arestis & Panicos O. Demetriades & Kul B. Luintel, 1997. "Financial Development and Economic Growth: the Role of Stock Markets," Keele Department of Economics Discussion Papers (1995-2001) 97/05, Department of Economics, Keele University.
    3. Harris, Richard D. F., 1997. "Stock markets and development: A re-assessment," European Economic Review, Elsevier, vol. 41(1), pages 139-146, January.
    4. Panicos O. Demetriades & Philip Arestis, 1996. "Financial Development and Economic Growth: Assessing the Evidence," Keele Department of Economics Discussion Papers (1995-2001) 96/16, Department of Economics, Keele University.
    5. Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, vol. 37(2-3), pages 632-640, April.
    6. Ross Levine, 2003. "More on finance and growth: more finance, more growth?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 31-46.
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