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Stock market development and economic growth: Evidence from least developed countries

  • Boopendra Seetanah
  • Ushad Subadar
  • Raja Vinesh Sannassee
  • Matthew Lamport
  • Vashisht Ajageer
Registered author(s):

    Purpose – The objective of this paper is to examine the impact of stock market development on economic growth for a sample of least developed countries. Design/methodology/approach – A panel of 10 countries for the period 1995 to 2009 was used. Taking into account the possible existence of endogeneity in stock market-growth modelling, the study considers both static and dynamic panel data estimates. Econometric analysis is based on estimation of a dynamic panel model with GMM estimators which in fact proves the presence of dynamism in the model. Findings – The results show an overall insignificant relationship between stock market development and economic growth for least developed countries. However, the results show that banking development and education are the main factors contributing towards growth of these economies. In particular, these results can be explained by the fact that these economies are mostly banking oriented and that their stock markets are relatively young. Originality/value –Relationship between stock market development and economic growth has been of a major concern among academics, policy makers and economists around the world in the recent decades. The importance of stock market development has been analysed empirically quite extensively, but conclusions on such importance varied across different studies. The paper attempts to fill the research gap in the existing literature underlining the impact of financial market development on economic growth in least developed countries.

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    File URL: http://finance-and-trade.htw-berlin.de/fileadmin/working_paper_series/wp_05_2012_Seetanah-et-al_Stock-market.pdf
    File Function: First version, 2012
    Download Restriction: no

    Paper provided by Hochschule fuer Technik und Wirtschaft, Berlin in its series Competence Centre on Money, Trade, Finance and Development with number 1205.

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    Length: 23 pages
    Date of creation: Jul 2012
    Date of revision:
    Publication status: Published in Berlin Working Papers on Money, Finance, Trade and Development, July 2012
    Handle: RePEc:mtf:wpaper:1205
    Contact details of provider: Web page: http://finance-and-trade.htw-berlin.de

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