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Stock market and economic growth in Eastern Europe

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  • Prats Albentosa, María Asuncíon
  • Sandoval, Beatriz

Abstract

A developed financial system is essential in a market economy. This paper studies the importance of the development of financial markets in general, and the stock market in particular, from the review of existing literature in the area of the relationship between financial development and economic growth, and especially, the link between the stock market and economic growth. Through an empirical analysis for six countries in Eastern Europe (Bulgaria, Slovakia, Hungary, Poland, Czech Republic and Romania) it is tried to show the link between the stock market development and economic growth in these countries from 1995 to 2012 in order to explain the transition processes, from communist to market economies, which began with the fall of the Berlin Wall in 1989. The results show evidence of Granger causality between economic growth variables and financial market variables.

Suggested Citation

  • Prats Albentosa, María Asuncíon & Sandoval, Beatriz, 2016. "Stock market and economic growth in Eastern Europe," Economics Discussion Papers 2016-35, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201635
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    References listed on IDEAS

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    1. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h4687h53k is not listed on IDEAS
    2. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    3. Cândida Ferreira, 2013. "Bank performance and economic growth: evidence from Granger panel causality estimations," Working Papers Department of Economics 2013/21, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    4. Joseph Stiglitz & Amartya K. Sen & Jean-Paul Fitoussi, 2009. "The measurement of economic performance and social progress revisited: Reflections and Overview," Working Papers hal-01069384, HAL.
    5. Joseph E. Stiglitz & Amartya Sen & Jean-Paul Fitoussi, 2009. "The measurement of economic performance and social progress revisited," Documents de Travail de l'OFCE 2009-33, Observatoire Francais des Conjonctures Economiques (OFCE).
    6. Agnieszka Gehringer, 2014. "Financial liberalisation, financial development and productivity growth: an overview," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 7(1), pages 40-65.
    7. Guglielmo Maria Caporale & Peter G. A Howells & Alaa M. Soliman, 2004. "Stock Market Development And Economic Growth: The Causal Linkage," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(1), pages 33-50, June.
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    More about this item

    Keywords

    economic growth; stock market; financial markets; financial development;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G2 - Financial Economics - - Financial Institutions and Services

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