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This paper analyzes two views on the issue of FDI and stock market development. The first view is that FDI is negatively correlated with the development of stock markets. The second view is that FDI is positively related to stock market development. After addressing the issues that might lead to these conclusions, the hypothesis is tested that the level of stock market development in a country is positively correlated to FDI. Data is collected from four Latin American countries and an empirical model is proposed to explain the observed relationship. Additional explanatory variables were included, and a model is developed.

This study takes a broad approach to the relationship between political risk resolution through democracy and stock market development. Specifically, it examines the empirical relationship between the degree of democracy (ranging from non-democracies or autocracies to well-established “mature” democracies) and stock market size and liquidity. Using the random effects Generalized Least Squares methodology on a sample of 22 African countries and spanning the period 1985–2011, this study finds (i) the greater the degree of democracy, the greater the liquidity of the stock market but the impact on the size of the market is insignificant; (ii) the relationship between military leadership and stock market development is statistically insignificant; (iii) having constitutional limits on the number of years a chief executive is allowed to serve promotes stock market development; and (iv) a higher degree of political competitiveness has a significantly positive impact on both stock market size and liquidity.

This study attempts to examine the relationship between the banking sector and stock market development in India.

To analyze the relationship between banks and stock market development, the ratio of stock market capitalization to GDP is proxied by stock market development. The determinants of the stock market development are used for analysis namely domestic credit to the private sector as a ratio of GDP is used as a proxy for the development of banks, saving rate, per capita real GDP, and inflation. The autoregressive distributed lag (ARDL)-Bounds testing approach is used for the analysis. The paper also used the unrestricted error correction model and CUSUM and CUSUM square test to check the stability of the model.

The ARDL bounds test found that there is a long-run relationship between stock market development and bank-centered financial development. The results also revealed that the stock market is positively influenced by the development of banks, savings, and per capita real GDP in the short-run as well as long-run.

This paper suggests that improvement of banking sector plays an important role to increase liquidity of the capital market development in India. This paper also suggests that the economic growth and savings rate have positive impact to induce the capital market growth in both short run and long run.

The study has investigated the empirical relationship between the banking sector and the stock market development in a different methodological approach by using an ARDL model which is appropriate for a small sample size. There are few studies related to bank-centered financial development and stock market development in the context of India.

The purpose of this paper is to investigate the impact of foreign direct investment (FDI) on the stock market development in Nepal.

The study used Johansen cointegration approach to determine long-run relationship and VEC Granger causality test to check the causal relations between the variables. The sample covered annual time-series data for the period 1996–2020.

The results suggest that FDI plays significant positive role in the stock market development in the long-run but inversely affect in the short-run. Unidirectional causality running from FDI to stock market development is observed in the long-run and bidirectional in the short-run. There is an insignificant positive relationship between exchange rate and FDI in the short-run. Banking sector development complements stock market development in the short-run but act as a substitute in the long-run. The statistically negative coefficient of exchange rate imply that the appreciation of the home currency encourage the development of the stock market in the long-run.

The positive and statistical coefficients of cointegration results indicate that FDI complements the development of stock market in Nepal in the long-run. Furthermore, the depreciation of the domestic currency may potentially contribute to the foreign direct investments in Nepal.

The purpose of this study is to empirically examine the impact of stock market development on the economic growth for a panel of 27 emerging economies using annual data over the period from 1995 to 2012.

A second-generation panel unit root test developed by Pesaran (2007) has been used to test the stationary properties of the data series. To achieve the study objectives and to mitigate the endogeneity problem that exists in the given model, the authors use a dynamic panel “system GMM” estimator. The authors also use a heterogeneous panel causality test proposed by Dumitrescu and Hurlin (2012) to examine the direction of causality among the variables.

The empirical findings indicate that stock market development significantly contributes to economic growth. Further, a unidirectional causality running from stock market development to economic growth has been found. This finding is consistent with the supply-leading hypothesis. Besides stock market development, it is also evident that macroeconomic variables, such as investment ratio, trade openness and exchange rates, have significant impact on economic growth.

The findings suggest that a well-functioning stock market, a more globalized economy and increasing aggregate investment can potentially foster the economic growth in those emerging economies.

Unlike other studies, this study constructs three alternate composite indices along with the individual indicators of stock market development and applies robust panel econometric techniques to establish more reliable results.

The purpose of this paper is to investigate the short and long run causal relationship between stock market development and economic growth in sub-Saharan Africa within the period 1990 and 2020.

Using panel data from 1990–2020 obtained from the World Bank development indicators, the study makes use of the autoregressive distributed lag model and the Granger causality and cointegration to analyze the long and short run causal relationship between stock market development and economic growth in sub-Saharan Africa.

The findings unveiled that stock market capitalization had a positive and significant effect on economic growth in the long run and a negative insignificant effect in the short run within the period of 1990–2020 while stock market liquidity measured through total value of shares traded and turnover ratio had a negative and significant effect on economic growth in sub-Saharan Africa within the period of 1990–2020. The Granger causality test showed an inconclusive result between stock market development and economic growth; implying that the authors cannot say if it is stock market development that causes economic growth or it is economic growth that causes stock market development within the period of 1990–2020.

The findings suggest that governments of sub-Saharan African countries should encourage stock market development by implementing favorable rules for companies listing on their stock market, promote stock market integration with world markets to diversify risk, increase public awareness on stock markets, increase investors' confidence level and finally, remove stock market impediments like high taxes, legal and regulatory barriers to its development.

This study contributes to the existing literature by offering a whole new perspective on stock market development and economic growth since its conception in sub-Saharan Africa. Again, contrary to other papers, the study show how stock market development can contribute to the growth of sub-Saharan Africans’ economy.

The paper aims to study the importance of financial market development and financial structure in explaining the financial policies of firms in emerging market countries.

The paper uses a panel data of 32 countries and the system generalized method of moments approach.

The analysis shows that stock market development is associated with higher use of external finance relative to internal finance, while bond market development is associated with lower use of external finance relative to internal finance. The findings of this study also indicate that stock market development tends to shift the policies of firms towards less debt and more equity, and bond market development is associated with higher debt and less equity in emerging economies.

The value of this study is in respect of its contribution to the extant literature on corporate financial policies in emerging market economies.

The purpose of this paper is to re-examine the relationship between a country’s aggregate stock market and general economic development for 14 emerging economies for the period from 1995 to 2014.

The methodological approach of the paper is multifold. First, the authors use cointegration analysis to determine the simple dynamics among the variables. Second, the authors utilize vector autoregression analysis to study the dynamics among the variables for the 14 countries. Third, the authors employ panel analysis to determine common variations among the variables and across countries.

When examining the linkage between the stock market and economic development, proxied by gross domestic product growth or with gross fixed capital formation growth, the authors did not find a meaningful relationship between them. However, when the authors included additional control variables strong, dynamic interactions between the two magnitudes surfaced. Specifically, it was found that the stock market is positively and robustly correlated with contemporaneous and future real economic development and, thus, it directly contributed to a country’s economic development either through the production of goods and services or the accumulation of real capital. Thus, it can be inferred that the stock market alone is not capable of boosting economic development in these countries unless being part of a comprehensive financial system (which includes banks) as well as investment in real capital.

The policy implications are clear. Government authorities must recognize that the stock market alone is not a driver of economic development and that a sound, efficient financial system (which includes banks) must be present in order to contribute and foster economic development.

The study is original in the sense that it examines various financial and economic variables to determine the degree of (or dynamic interactions among) the stock market and the real economy for each and all emerging markets in the sample.

The paper investigates whether Granger causal relationships exist between bond market development, stock market development, economic growth and two other macroeconomic variables, namely, inflation rate and real interest rate. The study aims to expand the domain of economic growth by including a more in-depth analysis of the possible impact that bond market and stock market development has on economic growth than is normally found in the literature.

This paper uses a panel data set of the G-20 countries for the period 1991-2016. It uses a panel vector auto-regression model to reveal the nature of any Granger causality among the five variables.

The paper provides empirical insights that both bond market development and stock market development are cointegrated with economic growth, inflation rate and real interest rate. The most robust result from the panel Granger causality test is that bond market development, stock market development, inflation rate and real interest rate are demonstrable drivers of economic growth in the long run.

Because of the chosen research approach, the research results may lack theoretical foundations. Therefore, perhaps the more fully grounded interactive findings of this study can inspire theorists to fill the missing gap.

This paper includes lessons for policymakers in the G-20 countries seeking to stimulate economic growth in the long run and how they need to ensure greater stability of the interest rate and inflation rate as well as fully developing their financial markets, as both bond markets and stock markets are obvious drivers of economic growth.

This paper fulfills an identified need to study causal relationships between bond market development, stock market development, economic growth and two other macroeconomic variables, i.e. inflation rate and real interest rate.

The purpose of this paper is to examine the macroeconomic determinants of stock market development in South Africa during the period 1975–2015. Specifically, it examines the impact of banking sector development, economic growth, inflation rate, real interest rate and trade openness on the development of the South African stock market.

The author employs autoregressive distributed lag bounds testing procedure that allows the author to empirically investigate both the short- and long-run relationships between the stock market development and its determinants in the context of South Africa. In addition, the author also conducts a sensitivity analysis by accounting for the presence of structural breaks in the underlying series to check for the robustness of the estimation.

This paper confirms the findings by other studies that banking sector development and economic growth promote stock market development, while inflation rate and real interest rate inhibit stock market development. In addition, this paper finds an interesting result in the fact that trade openness has a negative impact on stock market development, which is different from the findings of many other studies.

Currently, while the theoretical and empirical literature presents diverse views on the relationship between each determinant and stock market development, no study has focussed on the South African stock market. Given the significant role that the South African stock market plays in Africa as measured by its market capitalisation and market capitalisation ratio, there is a need for a better understanding of the macroeconomic factors influencing its development.