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Do Stock Markets Promote Economic Growth?

  • Jan Hanousek

    (CERGE-EI)

  • Nauro F. Campos

    (CERGE-EI)

  • Randall K. Filer

    (Hunter College & The Graduate Center of the University of New York ; CERGE-EI)

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 to provide evidence of a positive and significant causal relationship going from stock market development to economic growth, particularly for less developed countries.

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File URL: http://128.118.178.162/eps/fin/papers/0012/0012006.pdf
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Paper provided by EconWPA in its series Finance with number 0012006.

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Length: 21 pages
Date of creation: 16 Feb 2001
Date of revision:
Handle: RePEc:wpa:wuwpfi:0012006
Note: Type of Document - Acrobat PDF; pages: 21 ; figures: included
Contact details of provider: Web page: http://128.118.178.162

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  1. Marc Nerlove, 1968. "Further Evidence on the Estimation of Dynamic Economic Relations from a Time Series of Cross-Sections," Cowles Foundation Discussion Papers 257, Cowles Foundation for Research in Economics, Yale University.
  2. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  3. Perotti, Enrico C. & van Oijen, Pieter, 2001. "Privatization, political risk and stock market development in emerging economies," Journal of International Money and Finance, Elsevier, vol. 20(1), pages 43-69, February.
  4. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
  5. Daron Acemoglu & Fabrizio Zilibotti, 1994. "Was Prometheus unbound by chance? Risk, diversification and growth," Economics Working Papers 98, Department of Economics and Business, Universitat Pompeu Fabra.
  6. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633, March.
  8. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  9. Levine, Ross & Zervos, Sara, 1996. "Stock market development and long-run growth," Policy Research Working Paper Series 1582, The World Bank.
  10. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
  11. Rousseau, P. L. & Wachtel, P., 2000. "Equity markets and growth: Cross-country evidence on timing and outcomes, 1980-1995," Journal of Banking & Finance, Elsevier, vol. 24(12), pages 1933-1957, December.
  12. Gallinger, George W, 1994. "Causality Tests of the Real Stock Return-Real Activity Hypothesis," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(2), pages 271-88, Summer.
  13. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  14. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
  15. James Dow & Gary Gorton, 1995. "Stock Market Efficiency and Economic Efficiency: Is There a Connection?," NBER Working Papers 5233, National Bureau of Economic Research, Inc.
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  18. Demirguc-Kunt, Ash & Maksimovic, Vojislav, 1996. "Stock Market Development and Financing Choices of Firms," World Bank Economic Review, World Bank Group, vol. 10(2), pages 341-69, May.
  19. Klaus Neusser & Maurice Kugler, 1998. "Manufacturing Growth And Financial Development: Evidence From Oecd Countries," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 638-646, November.
  20. Levine, Ross & Zervos, Sara, 1996. "Stock markets, banks, and economic growth," Policy Research Working Paper Series 1690, The World Bank.
  21. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
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  26. Ahmed, S. M. & Ansari, M. I., 1998. "Financial sector development and economic growth: The South-Asian experience," Journal of Asian Economics, Elsevier, vol. 9(3), pages 503-517.
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  29. Conte, Michael A & Darrat, Ali F, 1988. "Economic Growth and the Expanding Public Sector: A Reexamination," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 322-30, May.
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  34. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  35. Hsiao, Cheng, 1981. "Autoregressive modelling and money-income causality detection," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 85-106.
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