Effect of bond market development on economic growth of selected developing countries
Journal of Economic and Administrative Sciences
ISSN: 1026-4116
Article publication date: 24 May 2022
Abstract
Purpose
This paper examines the effect of bond market development on economic growth of selected developing countries from 1990 to 2020. Previous studies provide inconsistent results on the effect of bond market development on economic growth. Some results reveal positive effects while others show negative effects of bond market development on economic growth. These conflicting findings have motivated research.
Design/methodology/approach
The autoregressive distributed lag (ARDL) and co-integration methods are used for analysis. The gross domestic product per capita proxies economic growth while government bond capitalisation and corporate bond capitalisation measure bond market development.
Findings
The findings unveil a long-term effect within the series. The results disclose that government bond capitalisation, trade openness and inflation positively affect economic growth while corporate bond capitalisation and domestic credit to the private sector presents negative effects on economic growth.
Research limitations/implications
The results propose that the governments should issue more bonds to raise funds for long-term economic growth initiatives. The governments should promote bond market development such that the corporate bonds issued boost economic growth by limiting lengthy documentations and bottlenecks in the bond market listing and issue procedures. The policymakers and regulatory authorities should implement policies which attract investors and encourage companies' listing in the countries' bond markets.
Originality/value
The study’s findings add value that government bond capitalisation positively impacts economic growth, while corporate bond capitalisation negatively affects economic growth in developing countries.
Keywords
Acknowledgements
The authors appreciate the mentorship of Prof. Shu Elvis and staff of the Department of Banking and Finance, University of Nigeria, Nsukka. There is no funding for this research.
Citation
Nneka, U.J., Ngong, C.A., Ugoada, O.A. and Onwumere, J.U.J. (2022), "Effect of bond market development on economic growth of selected developing countries", Journal of Economic and Administrative Sciences, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEAS-01-2022-0015
Publisher
:Emerald Publishing Limited
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