Panel regression of stock market indices dynamics in south-eastern European economies

Abstract

We tested the hypothesis of pro-cyclicality of the stock exchanges indices regarding economic activity of south-eastern European countries (SEE) in the Two-Stage Least Squares (TSLS) model in order to demonstrate the degree and pace of integration of 'new' financial markets into larger ones (EU). Rising stock prices in the SEE countries may be the sign of economic growth in the region in the light of the financial integration process. Results of panel estimates support the hypothesis of pro-cyclicality in the period of transition of the SEE region and financial integration, due to the opening of the market economy and re-pricing of systematic risk followed by large capital inflows, GDP growth, trade liberalisation and increased industrial production as well as the implementation of reforms regarding EU integration. Also significant is the negative coefficient of government debt in the SEE group results could be interpreted as a 'contagion effect' of the recent global financial crisis that spread beyond national borders.

The role of the macroeconomic environment in shaping capital market co-movement in C.E.E. countries

“…Furthermore, we can also offer a broader perspective of the phenomenon in C.E.E. countries because previous studies focus rather on a single country (Hsing, 2011) or fewer countries than in our sample (Cevik, Korkmaz, & Cevik, 2017;Dra zenovi c & Kusanovi c, 2016;Pe sa & Festi c, 2014).…”

Business Cycle – Growth Nexus: A Review

“…Different economic factors and institutional frameworks, distinct from international trade and financial frameworks, are responsible for different economic performances in different times (such as in South East Asia, China and South Korea, Brazil and Argentina, some countries in the Caribbean area as well as in Europe's "periphery") where growth trends and fluctuations are just a part of common business cycle and these fluctuations do not represent the form of decoupling. Past episodes with large synchronised declines in global growth were characterized by common disturbances that were either truly global in nature (abrupt oil price changes), inflation volatility (Rizvi et al 2014), were correlated across countries (disinflationary policies during the early 1980s), or involved global movements in asset prices (the synchronous equity price declines) (Dajčman 2014;Kašćelan et al 2014;Peša, Festić 2014;Helbling et al 2007). What is the future perspective of synchronization process is hard to tell, considering that business cycles tend to be more synchronized during a periods of economic downfalls but there is also no evidence that synchronicity will erode, at least as long as globalization has so resolute grasp.…”

Montenegrin Stock Exchange Market on a Short-Term Perspective

“…Configuring the geo-economic location, Montenegro is a developing country with an open economy in Southeast Europe (SEE) (Bacovic 2007;Khodaparasti and Mohammadpour 2016;Simovic 2021). Peša and Festić (2014) analysed stock exchange markets in SEE countries (Bosnia and Herzegovina, Bulgaria, Croatia, Montenegro, Serbia, Slovenia, and Romania). Most of them usually have inexperienced financial institutions, primitive financial instruments, and an inefficient capital market because of no transparent trading with soaring transaction fees (Bernard 1993;Edgar 1996).…”