IDEAS home Printed from https://ideas.repec.org/p/iis/dispap/iiisdp182.html
   My bibliography  Save this paper

Equity Markets and Economic Development: What Do We Know

Author

Listed:
  • Thomas Lagoarde-Segot
  • Brian M. Lucey

Abstract

The objective of this paper is to review the transmission mechanisms uniting equity market development and economic growth in developing countries. We find that the theoretical impact of equity markets is ambiguous. At the domestic level, the allocation function of equity markets appears conditioned by the extent of informational efficiency. Turning to international linkages, theoretical models suggest that equity market integration lowers the cost of capital, increases financial vulnerability and has a mixed impact on capital flows. Taking this into account, two conclusions arise. First, equity market development policies should focus on reaching and maintaining adequate levels of institutional transparency. Second, the optimal degree of international integration depends on the society’s preference between international accessibility and domestic stability.

Suggested Citation

  • Thomas Lagoarde-Segot & Brian M. Lucey, 2006. "Equity Markets and Economic Development: What Do We Know," The Institute for International Integration Studies Discussion Paper Series iiisdp182, IIIS.
    • Handle: RePEc:iis:dispap:iiisdp182
    Note: Length:
    as

    Download full text from publisher

    File URL: https://www.tcd.ie/triss/assets/PDFs/iiis/iiisdp182.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mohamed El Hedi Arouri, 2004. "Intégration Financière et Diversification Internationale de Portefeuilles : une Analyse Multivariée," Post-Print halshs-00207737, HAL.
    2. repec:bla:jfinan:v:59:y:2004:i:3:p:1295-1324 is not listed on IDEAS
    3. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rahman, Molla Ramizur & Misra, Arun Kumar & Lucey, Brian M. & Mohapatra, Sabyasachi & Kumar, Satish, 2023. "Network structure and risk-adjusted return approach to stock indices integration: A study on Asia-Pacific countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 87(C).
    2. Yarovaya, Larisa & Brzeszczyński, Janusz & Goodell, John W. & Lucey, Brian & Lau, Chi Keung Marco, 2022. "Rethinking financial contagion: Information transmission mechanism during the COVID-19 pandemic," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    3. Chebbi, Ali & Hedhli, Amel, 2022. "Revisiting the accuracy of standard VaR methods for risk assessment: Using the Copula–EVT multidimensional approach for stock markets in the MENA region," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 430-445.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mounira Chniguir & Mohamed Karim Kefi & Jamel Eddine Henchiri, 2017. "The Determinants of Home Bias in Stock Portfolio: An Emerging and Developed Markets Study," International Journal of Economics and Financial Issues, Econjournals, vol. 7(6), pages 182-191.
    2. Brian Muyambiri & Nicholas Odhiambo, 2017. "Financial Development, Savings and Investment in South Africa: A Dynamic Causality Test," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 17(3), pages 1-10, September.
    3. Laurent Cavenaile & Christian Gengenbach & Franz Palm, 2014. "Stock Markets, Banks and Long Run Economic Growth: A Panel Cointegration-Based Analysis," De Economist, Springer, vol. 162(1), pages 19-40, March.
    4. Stanislaw Kaszuba, 2010. "Prospects For The Future Growth Of The Newconnect Stock Market," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 5(2), pages 117-126, December.
    5. Angelique G. Nindi & N. M. Odhiambo, 2015. "Poverty and Economic Growth in Swaziland: An Empirical Investigation," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 13(1 (Spring), pages 59-74.
    6. Mohd Kamarul Azriq Bin Yusof & Norimah Binti Rambeli Ramli, 2017. "The Effect of Selected Macroeconomic Variables and Globalization Factors on Return on Stock Market for Selected Sectors in Malaysia," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(6), pages 1004-1011, June.
    7. Satyananda Sahoo, 2014. "Financial Intermediation and Growth: Bank-Based versus Market-Based Systems," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 8(2), pages 93-114, May.
    8. Vardhan, Harsh & Sinha, Pankaj, 2015. "Influence of Macroeconomic Variable on Indian Stock Movement: Cointegration Approach," MPRA Paper 64369, University Library of Munich, Germany, revised 10 May 2015.
    9. Yongming Shi & Khalid Ahmed & Sudharshan Reddy Paramati, 2021. "Determinants of stock market development and price volatility in ASEAN plus three countries: The role of institutional quality," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 560-572, January.
    10. Tekilu Tadesse & Jemal Abafia, 2019. "The causality between Financial Development and Economic Growth in Ethiopia: Supply Leading vs Demand Following Hypothesis," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 3(1), pages 87-115.
    11. Heidi Quah & Janto Haman & Dharmendra Naidu, 2021. "The effect of stock liquidity on investment efficiency under financing constraints and asymmetric information: Evidence from the United States," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2109-2150, April.
    12. Apergis, Nicholas & Artikis, Panagiotis G. & Kyriazis, Dimitrios, 2015. "Does stock market liquidity explain real economic activity? New evidence from two large European stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 38(C), pages 42-64.
    13. Mohammad Enamul Hoque & Noor Azuddin Yakob, 2017. "Revisiting stock market development and economic growth nexus: The moderating role of foreign capital inflows and exchange rates," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1329975-132, January.
    14. Faisal Faisal & Peshraw Majid Muhamad & Turgut Tursoy, 2016. "Impact of Economic Growth, Foreign Direct Investment and Financial Development on Stock Prices in China: Empirical Evidence from Time Series Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1998-2006.
    15. Pradhan, Rudra P. & Arvin, Mak B. & Nair, Mahendhiran & Bennett, Sara E., 2020. "Unveiling the causal relationships among banking competition, stock and insurance market development, and economic growth in Europe," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 74-87.
    16. Odhiambo, Nicholas M., 2009. "Electricity consumption and economic growth in South Africa: A trivariate causality test," Energy Economics, Elsevier, vol. 31(5), pages 635-640, September.
    17. André Farber & Nguyen Huu Tu & Tran Tri Dung & Quan-Hoang Vuong, 2008. "The financial storms in Vietnam's transition economy: a reasoning on the 1991-2008 period," Working Papers CEB 08-023.RS, ULB -- Universite Libre de Bruxelles.
    18. 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 Kiel).
    19. Abdullahil Mamun & Mohammad Hasmat Ali & Nazamul Hoque & Md Masrurul Mowla & Shahanara Basher, 2018. "The Causality between Stock Market Development and Economic Growth: Econometric Evidence from Bangladesh," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(5), pages 212-220, May.
    20. Dumičić Ksenija & Žmuk Berislav, 2015. "Statistical Control Charts: Performances of Short Term Stock Trading in Croatia," Business Systems Research, Sciendo, vol. 6(1), pages 22-35, March.

    More about this item

    Keywords

    Equity Markets; Economic Development.;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iis:dispap:iiisdp182. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Maeve (email available below). General contact details of provider: https://edirc.repec.org/data/cetcdie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.