scholarly journals Stock market development and economic growth in Tanzania: an ARDL and bound testing approach

2020 ◽  
Vol 5 (3) ◽  
pp. 187-206
Author(s):  
Saganga Mussa Kapaya
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Time Series Data ◽  
Market Development ◽  
Series Data ◽  
Content Type ◽  
Stock Market Development ◽  
Testing Procedures ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to contribute to empirical evidence by recognizing the importance of stock markets in the financial system and consequently its causality to economic growth and vice versa. Design/methodology/approach The study used the autoregressive distribute lag model (ARDL) with bound testing procedures, the sample covered quarterly time-series data from 2001q1 to 2019q2 in Tanzania. Findings The results suggest that stock market development have both negative and positive causality for both short-run dynamics and long-run relationship with economic growth. Economic growth is found to only cause and relate negatively to liquidity both in the short-run and in the long-run. The results show predominantly a unidirectional causality flow from stock market development to economic growth and finds partial causality flow from economic growth to stock market development, as represented by stock market turnover which proxied liquidity. Originality/value The use of quarterly data to reflect more realistically the dynamics of the variables because yearly data may sometimes cover-up specific dynamics that may be useful for prediction and policy planning. The study uses indices to capture general aspects within the stock market against economic growth as an intuitive way to aggregate the stock market development effects.

scholarly journals Stock Market Development And Economic Growth In Hong Kong: An Empirical Investigation

2012 ◽  
Vol 11 (7) ◽  
pp. 795 ◽  
Author(s):  
SY Ho ◽  
NM Odhiambo
Keyword(s):  
Economic Growth ◽  
Hong Kong ◽  
Stock Market ◽  
Time Series Data ◽  
Market Development ◽  
Series Data ◽  
Stock Market Development ◽  
Long Run ◽  
Short Run ◽  
Market Capitalisation

This paper examines the relationship between stock market development and economic growth using time-series data from Hong Kong. The study uses three proxies of stock market development, namely: stock market capitalisation, stock market traded value, and stock market turnover. Given the weaknesses associated with the traditional co-integration techniques, the current study uses the recently introduced ARDL-bounds testing approach to examine the nexus between stock market development and economic growth in a dynamic setting. The empirical results show that the direction of causality between stock market development and economic growth depends on the proxy used to measure the level of stock market development. When stock market capitalisation is used as a proxy for stock market development, a distinct unidirectional causal flow from stock market development to economic growth is found to prevail, without any feedback. However, when stock market turnover is used, a causal flow from economic growth to stock market development is found to prevail in the short run and in the long run, while a causal flow from stock market development to economic growth is only found in the short run. The causality between stock market traded value and economic growth, however, failed to yield any long-run causal relationship from either direction. Only a short-run causality flow from economic growth to stock market traded value could be detected in this case.

Stock Market Development and Economic Growth: Empirical Evidence from Nepal

2021 ◽  
pp. 097215092110168
Author(s):  
Jeevan Kumar Bhattarai ◽  
Ramji Gautam ◽  
Keshab Khatri Chettri
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Time Series Data ◽  
Control Variable ◽  
Market Development ◽  
Series Data ◽  
Stock Market Development ◽  
Market Capitalization ◽  
Testing Procedures ◽  
Distributed Lag

This study examines the relationship between stock market development and economic growth in Nepal by employing autoregressive distributed lag (ARDL) model with bound testing procedures. The study period covers annual time series data from 1994 to 2019. Indicators of the stock market development used are size, depth and efficiency represented by market capitalization as a percentage of gross domestic product (GDP), total value of shares traded as a percentage of GDP and total shares traded as a percentage of market capitalization, respectively. Following high correlations among these indicators, an aggregated index is constructed and used in the study. Real GDP per capita growth is taken as an economic growth indicator. The results suggest that there exists a long-run uni-directional causality relationship running from stock market development index to economic growth. Stock market size and liquidity are significant contributors, showing that stock market is able to mobilize capital and diversify risks with increased easiness in trading of stocks. The control variable market inflation shows no significant impact on either of the examined primary variables.

Has the low level of economic growth spurred informal sector activities in Uganda? An empirical analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Stephen Esaku
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Shadow Economy ◽  
Time Series Data ◽  
Series Data ◽  
Content Type ◽  
Low Level ◽  
Revenue Collection ◽  
Long Run ◽  
Short Run

PurposeIn this paper, the authors examine how economic growth shapes the shadow economy in the long and short run.Design/methodology/approachUsing annual time series data from Uganda, drawn from various data sources, covering the period from 1991 to 2017, the authors apply the ARDL modeling approach to cointegration.FindingsThis paper finds that an increase in economic growth significantly reduces the size of the shadow economy, in both the long and short run, all else equal. However, the long-run relationship between the shadow economy and growth is non-linear. The results suggest that the rise of the shadow economy could partially be attributed to the slow and sluggish rate of economic growth.Practical implicationsThese findings imply that addressing informality requires addressing underlying factors of underdevelopment since improvements in economic growth also translate into a reduction in the size of the shadow economy in the short and long run.Originality/valueThese findings reveal that the low level of economic growth is an issue because it spurs informal sector activities in the short run. However, as the economy improves, it becomes an incentive for individuals to operate in the informal sector. Additionally, tackling shadow activities in the short run could help improve tax revenue collection.

A Sectoral Analysis of the Role of Stock Market Development on Economic Growth: Empirical Evidence from Indian Economy

2017 ◽  
Vol 18 (4) ◽  
pp. 911-923 ◽  
Author(s):  
Madhu Sehrawat ◽  
A.K. Giri
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
Time Series Data ◽  
Trade Openness ◽  
Series Data ◽  
Causality Test ◽  
Long Run ◽  
Short Run

The present study examines the relationship between Indian stock market and economic growth from a sectoral perspective using quarterly time-series data from 2003:Q4 to 2014:Q4. The results of the autoregressive distributed lag (ARDL) approach bounds test confirm the existence of a cointegrating relationship between sector-specific gross domestic product (GDP) and sector-specific stock indices. The empirical results reveal that sector-specific economic growth are significantly influenced by changes in the respective sector-specific stock price indices in the long run as well as in the short run. Apart from that, the control variables, such as trade openness and inflation, act as the instrument variables in explaining the variations in the sector-specific GDP of the economy. The results of Granger causality test demonstrate unidirectional long-run as well as short-run causality running from sector specific stock prices to respective sector GDP. The findings suggest that economic growth of the country is sensitive to respective sub-sector stock market investments. The findings highlight the reasons for cyclical and counter-cyclical business phase for the overall economy.

scholarly journals Impact of Stock Market Development on Economic Growth in BRICS

2018 ◽  
Vol 10 (1) ◽  
pp. 23
Author(s):  
Godfrey Osaseri ◽  
Ifuero Osad Osamwonyi
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Stock Market ◽  
World Bank ◽  
Time Series Data ◽  
Market Development ◽  
Series Data ◽  
Stock Market Development ◽  
Development Indicators ◽  
Effect Estimation

The study examines Stock Market development and economic growth in BRICS, Quarterly time series data for the period 1994QI to 2015Q4 were sourced from World Bank Indicator. The Panel Least Squares based on the fixed effect estimation was employed to determine how stock market development impacts on the economic growth of BRICS. Diagnostics tests were conducted to ascertain the robustness and stability of the regression results. The findings reveal that stock market development exerts significant impact on the economic growth. The study revealed that there is a positive correlation between stock market development indicators and BRICS’s economic growth. The study recommends that the weakness of each of the BRICS member country should be taken as policy focus and strategies necessary to strengthen them should be swiftly applied by the governments.

scholarly journals Stock Market and Economic Development: a Causality Test

2007 ◽  
Vol 3 (1) ◽  
pp. 36-44 ◽  
Author(s):  
Surya Bahadur G.C. ◽  
Suman Neupane
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Stock Market ◽  
Time Series Data ◽  
Series Data ◽  
Causality Test ◽  
Stock Market Development ◽  
Business Studies ◽  
Long Run ◽  
Made In

ABSTRACT An attempt has been made in this paper to examine the existence of causality relationship between stock market and economic growth based on the time series data for the year 1988 to 2005 using Granger causality test. The study finds the empirical evidence of long-run integration and causality of macroeconomic variables and stock market indicators even in a small capital market of Nepal. The causality has been observed only in real terms but not in nominal variables. In econometric sense, it depicts that the stock market plays significant role in determining economic growth and vice versa. Interestingly, the causation is evident with a lag of 3 to 4 years. Also, the paper reveals the importance of stock market development for fostering economic development. Journal of Nepalese Business Studies 2006/III/1 pp. 36-44

scholarly journals DOES STOCK MARKET DEVELOPMENT PLAY ANY ROLE IN THE EFFECT OF FDI ON ECONOMIC GROWTH IN NIGERIA? AN EMPIRICAL INVESTIGATION

2016 ◽  
pp. 51-61
Author(s):  
Oziengbe Scott Aigheyisi
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Time Series Data ◽  
Ordinary Least Squares ◽  
Growth Effect ◽  
Market Development ◽  
Series Data ◽  
Domestic Investment ◽  
Government Consumption ◽  
Stock Market Development

The objective of the paper is to investigate whether stock market development plays any role in the effect of foreign direct investment (FDI) on economic growth in Nigeria. Using annual time series data that span the period from 1981 to 2014, and employing the fully modified ordinary least squares (FMOLS) estimation technique, the empirical evidence indicates that FDI, domestic investment and stock market development positively and significantly affect economic growth, but the effect of the interaction between stock market development and FDI on economic growth is negative and significant, indicating that the Nigerian bourse is not yet fully developed to engender positive growth effect of FDI. The study further finds that government consumption expenditure and trade openness adversely affect the growth of the country’s real GDP per capita. Recommendations of the paper include efforts by the government to design and implement programmes and policies aimed at enhancing the attractiveness of the country to foreign and local investors, efforts by capital market regulators to enhance stock market efficiency, reduction of government consumption expenditures and import control.

scholarly journals Stock Market Development And Economic Growth: The Case Of Mauritius

2011 ◽  
Vol 8 (2) ◽  
Author(s):  
Baboo M Nowbutsing ◽  
M. P. Odit
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Stock Exchange ◽  
Market Development ◽  
Financial Health ◽  
Stock Market Development ◽  
Long Run ◽  
Short Run ◽  
Two Measures ◽  
The Impact

Stock market is an indicator of an economy financial health. It indicates the mood of investors in a country. As such, stock market development is an important ingredient for growth. The stock exchange of Mauritius is fairly new compared to many countries. This paper examines the impact of stock market development on growth in Mauritius. A time series econometric investigation is conducted over the period 1989 -20067. We analyse both the short run and long run relationship by constructing an ECM. Two measures of stock market development namely size and liquidity are used. We define size as the share of market capitalization over GDP and liquidity as volume of share traded over GDP. We found that stock market development positively affect economic growth in Mauritius both in the short run and long run.

scholarly journals Stock Market Development and Economic Growth: An Empirical Analysis of Zimbabwe (1989-2014)

2016 ◽  
Vol 7 (3) ◽  
pp. 20-36 ◽  
Author(s):  
Rabson Magweva ◽  
Tafirei Mashamba
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Stock Exchange ◽  
Market Development ◽  
Stock Market Development ◽  
Long Run ◽  
Short Run ◽  
To Come ◽  
Medium Enterprises ◽  
The Relationship

The relationship between stock market development and economic growth varies across nations and regions. This relationship is of significance to regulatory authorities, investors and portfolio managers in their operations aimed at enhancing the welfare of the citizens and clients at large. The purpose of this study is to examine the relationship between these two variables in Zimbabwe for the period 1989 to 2014. The paper employed the Vector Error Correction Model approach after establishing the order of integration (unit root tests) and cointegration between variables. All the variables were found to be stationary at 1% level after first differencing using the Phillips-Peron tests. The long run relationship was negative, whereas the short run coefficients were insignificant. Though contrary to financial theory, the results, to a large extent, testify to what happened during the period. Based on these findings, the Zimbabwe Stock Exchange and Securities and Exchanges Commission are urged to come up with alternative products to lure new listings from the small to medium enterprises. It is also recommended that all the stakeholders focus beyond the Zimbabwe Stock Exchange to promote economic growth as the firms seem to raise funds from other sources.

scholarly journals Stock market development, foreign capital inflows and economic growth in Zimbabwe: A multivariate causality test

2012 ◽  
Vol 9 (2) ◽  
pp. 313-322
Author(s):  
Kunofiwa Tsaurai ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Time Series Data ◽  
Capital Inflows ◽  
Market Development ◽  
Series Data ◽  
Causality Test ◽  
Stock Market Development ◽  
Foreign Capital Inflows ◽  
Variable Bias

In this study we examine the dynamic nexus between stock market development and economic growth – using time-series data from Zimbabwe. The causal relationship between stock market development and economic growth has been a subject of extensive debate in recent years. In an attempt to address the omission-of-variable bias, which has not been addressed by many previous studies, we have incorporated savings as a third variable in the bivariate setting between stock market development and economic growth – thereby creating a multivariate simulation. The study uses the Johansen–Juselius (Johansen and Juselius, 1990) (maximum likelihood) and a dynamic specification model to examine this linkage. The empirical results reveal that there is a distinct causal flow from stock market development to economic growth – without any feedback in Zimbabwe. The results also show that there is a unidirectional causal flow from savings to economic growth, and from stock market development to savings.

Sign in / Sign up

Export Citation Format

Share Document