Stock market development and economic growth in Sri Lanka

Jahfer, Athambawa; Inoue, Tohru

doi:10.1504/ijbem.2014.063888

Cited by 4 publications

(8 citation statements)

References 16 publications

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“…So, it confirms that, in the long run, stock market development can cause economic growth. Empirical studies support this finding (see for example, Albentosa et al 2016;Prats and Sandoval 2016;Marques et al 2013;Jahfer and Inoue 2014;Ndako 2010;Nsofor 2016). On the other hand, financial innovation also explained long-run causality with economic growth; it implies that long-run economic growth can be attained by ensuring the money supply in the economy through the efficient banking sector.…”

Section: Granger Causality Test Under Error Correction Term (Ecm)mentioning

confidence: 90%

Financial Innovation, Stock Market Development, and Economic Growth: An Application of ARDL Model

Qamruzzaman

Jiang

2018

IJFS

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This study aims to explore the relationship between economic growth, financial innovation, and stock market development of Bangladesh for the period 1980–2016. To investigate long-run cointegration, this study used the autoregressive distributed lagged (ARDL) bounds testing approach. In addition, the Granger-causality test is used to identify directional causality between research variables under the error correction term. Study findings from the ARDL bound testing approach confirm the existence of a long-run association between financial innovation, stock market development, and economic growth. Furthermore, the findings from the Granger-causality test support bidirectional causality between financial innovation, economic growth and stock market development, and economic growth both in the long run and short run. These findings support the theory that market-based financial development and financial innovation in the financial system can spur economic development.

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Section: Granger Causality Test Under Error Correction Term (Ecm)mentioning

confidence: 90%

Financial Innovation, Stock Market Development, and Economic Growth: An Application of ARDL Model

Qamruzzaman

Jiang

2018

IJFS

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“…The increase in the size of the stock market improves the ability of mobilizing and diversifying risk (Levine & Zervos, 1998), thus suggesting a positive relationship. Following Levine and Zervos (1996), Levine and Zervos (1998), Arestis et al (2001), Masaoud and Hardaker (2012), Jahfer and Inoue (2014), Sehrawat and Giri (2015), Svirydzenka (2016), Guru and Yadav (2019), and Paun et al (2019), the ratio between market capitalization and nominal GDP is chosen to be the measurement of the size of the stock market.…”

Section: The Proposed Modelmentioning

confidence: 99%

“…Accordingly, in literature, there are attempts to inquire into the link between each of these sectors and economic growth. The number of studies that examine the relationship between financial sector development and economic growth in the Sri Lankan context is only a few (Ahmed & Ansari, 1998;Sinha & Macri, 2001;Hemachandra, 2005;Habibullah & Eng, 2006;Fase & Abma, 2003;Jahfer & Inoue, 2014;De Silva, 2016). Even in these studies, the impact of financial sector development on economic growth is examined from either a bank-based or market-based perspective, meaning that the financial sector in those studies is assumed to be represented by either the banking sector or equity markets.…”

Section: Introductionmentioning

confidence: 99%

“…Even in these studies, the impact of financial sector development on economic growth is examined from either a bank-based or market-based perspective, meaning that the financial sector in those studies is assumed to be represented by either the banking sector or equity markets. Ahmed and Ansari (1998), Sinha and Macri (2001), Hemachandra (2005), Habibullah and Eng (2006), Fase and Abma (2003), and De Silva (2016) use banking sector variables to represent the financial sector development while Jahfer and Inoue (2014) uses the stock market to represent the same.…”

Section: Introductionmentioning

confidence: 99%

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The Impact of Financial Sector Development on Economic Growth: Evidence from Sri Lanka

Samuditha Ganepola,

Prabhath Jayasinghe

2023

VJM

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The objective of this study is to examine the impact of financial sector development on economic growth in Sri Lanka by taking two complementary sectors, namely banking and equity markets, to represent the financial sector. All previous studies in the Sri Lankan context have examined this relationship employing either the banking sector variables or equity market variables to represent the financial sector. This study is in favour of the supply-leading hypothesis and it tests the empirical validity of the hypothesis. The proposed model has been estimated with five banking sector variables and two equity market variables. Autoregressive Distribution Lag (ARDL) bounds testing approach is employed to identify the existence of short- and long-run relationships. The study relies on quarterly data from 2002:01 to 2020:04. Findings reveal that there exists a long-run relationship between financial sector variables and economic growth. More specifically, the size of financial intermediaries, interest rate, monetization, and size of the stock market have a significant positive impact on economic growth in the long-run. Somewhat surprisingly, the availability of credit to the private sector has a significant negative impact. All seven variables significantly influence economic growth in the short-run. Overall, the results of this study support the supply-leading hypothesis or the notion that financial sector development affects economic growth. These findings are mostly in line with previous literature. The results of seven diagnostic tests show that the estimated model is adequate for the purpose and estimation results are reliable. The study has some important policy implications. Keywords: Financial sector development, Economic growth, Banking sector development, Equity market development, ARDL

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“…In addition, the research result of the study by employing the stepwise regression analysis indicated that the most representative indicator of capital market that is positively associated to the real economic growth of each country is market capitalization. Jahfer and Inoue (2014) researched the relationship between stock market development and economic growth in Sri Lanka using quarterly data from 1996 to 2011. The stationary of the data was tested using Augmented Dickey Fuller (ADF) test.…”

Section: Introductionmentioning

confidence: 99%

Macro-Economic Variables and Stock Market Performance: Empirical Evidence from Colombo Stock Exchange

Amaresh

Anandasayanan

Ramesh

2020

VJHSS

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Stock market performance is considered as a significant indicator of financial and economic circumstances of a country. In a nutshell, a secured and regulated financial environment is being provided by the stock market where shares can be transacted at lower operational risk. The stock market also functions as a platform through savings, and investments of individuals are channelized into productive investment proposals. It allows capital formation and economic growth for the nation. The ultimate objective of this study is to examine the impact of macroeconomic variables on stock market performance. The macroeconomic variables (independent variables) used in this research study are Inflation, Interest Rate, and GDP. Stock market performance (All-Share Price Index) is the dependent variable. 120 Monthly observations from January 2009 to December 2018 had been taken for the study. The Augmented Dickey Fuller’s unit root test, Ordinary Least Squares Regression and Correlation analysis were applied to the variables. The results of correlation analysis indicated that inflation and Stock market performance are positively associated meanwhile interest rate, and GDP and Stock market performance are negatively correlated. The Ordinary Least Square results showed that nearly 75% of the variation in all share price index is explained by the three macroeconomic variables, GDP, TB and WPI. The study suggested some of the possible reasons for the positive impact of Inflation on the Colombo Stock market performance, and negative impact of Interest Rate on Stock market performance and recommended that efforts should be made to improve the Stock market performance.

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Stock market development and economic growth in Sri Lanka

Cited by 4 publications

References 16 publications

Financial Innovation, Stock Market Development, and Economic Growth: An Application of ARDL Model

Financial Innovation, Stock Market Development, and Economic Growth: An Application of ARDL Model

The Impact of Financial Sector Development on Economic Growth: Evidence from Sri Lanka

Macro-Economic Variables and Stock Market Performance: Empirical Evidence from Colombo Stock Exchange

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