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Stock market development as a leading indicator of future economic growth in the BRICS countries

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  • Klara Zalesakova

    (Department of Statistics and Operation Analysis, Faculty of Business and Economics, Mendel University in Brno, Zemedelska 1, 613 00 Brno, Czech Republic)

Abstract

This paper deals with the verification of the assumption of forecasting ability of stock indices in the BRICS countries. The literature review focuses on the definition of the financial and stock markets, measuring the economic performance and the interdependence of stock markets and economic growth. The analytical part is based on time series of GDP and stock indices of the BRICS countries, which are processed using correlation analysis, VAR models and Granger causality test, which is used to determine the existence and possible direction and strength of the causal relationship between the variables. The results show that the role of stock indices as a leading economic indicator is overestimated. However, GDP and stock indices interact, the strength and direction of causal relationships is affected by number of factors.

Suggested Citation

  • Klara Zalesakova, 2022. "Stock market development as a leading indicator of future economic growth in the BRICS countries," MENDELU Working Papers in Business and Economics 2022-82, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:82_2022
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    More about this item

    Keywords

    BRICS; stock market; stock index; economic growth; GDP; correlation analysis; VAR model; causality; Granger test causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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