Premium
Endogenous Growth Models and Stock Market Development: Evidence from Four Countries
Author(s) -
Caporale Guglielmo Maria,
Howells Peter,
Soliman Alaa M.
Publication year - 2005
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2005.00270.x
Subject(s) - economics , stock market , endogenous growth theory , stock (firearms) , empirical evidence , causality (physics) , exploit , monetary economics , investment (military) , macroeconomics , human capital , market economy , mechanical engineering , paleontology , philosophy , physics , computer security , epistemology , horse , quantum mechanics , politics , computer science , law , political science , engineering , biology
This paper re‐examines the relationship between stock market development and economic growth. It provides a theoretical basis for establishing the channel through which stock markets affect economic growth in the long run. It examines the hypothesis of endogenous growth models that financial development causes higher growth through its influence on the level of investment and its productivity. The empirical part of this study exploits techniques recently developed to test for causality in VARs. The evidence obtained from a sample of four countries suggests that investment productivity is the channel through which stock market development enhances the growth rate in the long run.