Does Stock Market Development Affect Economic Growth? Econometric Evidence From Bangladesh

Abstract

The study aims to evaluate the causality linkage between stock market development (SMD) and growth of the economy in Bangladesh. Using time series data of quarterly frequency through 2000Q1-2017Q4 and employing the Johansen cointegration approach the study reveals that there are long-run co-integrating relationships among the variables, namely, GDP, development of the stock market, net interest spread, real effective exchange rate and financial depth. The Vector Error Correction Model (VECM) confirms the presence of a long-term equilibrium relationship between GDP and other variables such as regressors as the system is found to be stable in the long-run. As revealed from the study, the short run positive impact of SMD on the growth of the Bangladesh economy sustains in the long run, which is also true for financial depth. However, financial deepening has a relatively large contribution to the output growth of Bangladesh than SMD. Granger causality tests assert that the causal association is unidirectional that runs from SMD to output growth.

Company-specific Characteristics and Market-driven Fixed Asset Revaluation in an Emerging Asian Economy

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“…Since many have indicated that FAR practices are one of the causes behind the 2010-11 stock market crash in Bangladesh, a briefing of the regulatory setting will be valuable (Khaled, 2011; On December 5, 2010, the bull market, as a consequence of gradual progression, turned into a bubble when the DSE General Index reached 8,918.5, which was almost 5.6 times higher than four years earlier. Similarly, the turnover increased by 61.7 times, and the market capitalization to GDP ratio reached a record high of 47% (Rahman, Hossain, & Habibullah, 2017;Mamun et al, 2018). On the next day, the bubble busted with damage, resulting in the highest one-day fall of 6.7% and a further 40% fall over the next two months.…”

Institutions and IPO activity: a multi-country study

“…Our manuscript belongs to the nascent literature (Lewellyn and Bao, 2014) that is trying to explain the ex ante factors that contribute to the creation of IPOs which measure the degree of change in total market capitalization per country. Stock market development constitutes a proxy for country financial depth, real effective exchange rates and GDP (Mamun et al, 2018). This study explores one formal and two informal cultural variables rule of law, uncertainty avoidance and masculinity in a sample of 64 countries over a 15-year period (2000-2014).…”