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Do Stock Markets Promote Economic Growth?

  • Nauro F. Campos
  • Jan Hanousek
  • Randall K. Filer

One of the most enduring debates in economics is whether financial development causes economic growth or whether it is a consequence of increased economic activity. Little research into this question, however, has used a true causality framework. This paper fills this lacuna by using Granger-causality tests and finds little evidence of a causal relationship going from stock market development to economic growth. We do find evidence that stock market development can cause currency appreciation, which may confound studies that use dollar denominated measures of economic growth.

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File URL: http://iweb.cerge-ei.cz/pdf/wp/Wp151.pdf
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Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp151.

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Date of creation: Oct 1999
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Handle: RePEc:cer:papers:wp151
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  1. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
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