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How to develop the capital market?: make countries fitness

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  • Julio Villavicencio Vásquez

    (Departamento de Economía de la Pontificia Universidad Católica del Perú)

Abstract

This paper examines the relationship between the competitiveness of a country’s productive system and the development of its capital markets. Competitiveness is measured using the Economic Fitness Index (EFI), which assess a country’s ability to produce diversified and complex goods. Analyzing panel data from 98 countries (1997–2022), the study finds a significant positive relationship between productive complexity and capital market development, even when controlling for macroeconomic stability, institutional quality, and banking development. The findings suggest that productive complexity enhances the demand for and supply of financial instruments, fostering deeper capital markets. Robustness checks using the Economic Complexity Index (ECI) confirm these results, underscoring the role of economic sophistication in financial market development. Palabras claves: Capital Market Development, Economic Fitness Index (EFI), Economic Complexity Index (ECI). JEL Classification-JE: C12, C14, G14, G15

Suggested Citation

  • Julio Villavicencio Vásquez, 2025. "How to develop the capital market?: make countries fitness," Documentos de Trabajo / Working Papers 2025-542, Departamento de Economía - Pontificia Universidad Católica del Perú.
    • Handle: RePEc:pcp:pucwps:wp00542
    DOI: 10.18800/2079-8474.0542
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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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