Title : Does Stock Market Development Cause Economic Growth? A Time Series Analysis for Bangladesh Economyā€¯,


Authors : Md. Sharif Hossain, and Khn. Md. Mostafa Kamal

Abstract : One of the most important questions arise in the economies of Bangladesh is whether stock market development causes economic growth or whether it is consequences of increased economic activity. That is why, in this paper the principal purpose has been made to investigate the causal relationship between stock market development and economic growth in Bangladesh. The data set covers annual time series data from 1976 to 2008. To investigate long-run causal linkages and short-run dynamics Engle-Granger causality and ML tests are applied. In this paper another attempt has been made to investigate the non-stationarity in the series of stock market development and economic growth by using modern econometric techniques. The co-integrated tests are applied to know whether this pair of variables shares the same stochastic trend or not. Also regression analysis has been conducted in order to examine the statistical association between stock market development and economic growth in Bangladesh. Here the variable real GDP growth rate is used as the proxy for economic growth and the stock market development is measured by the ratio of market capitalization to real GDP. From our analysis it has been found stock market development strongly influence the economic growth in Bangladesh, but there is no causation from economic growth to stock market development. Thus unidirectional causality has prevailed between stock market development and economic growth in the Bangladesh economy.


Journal : The Journal of International Finance and Economics Volume : 10 Year : 2010 Issue : 2
Pages : 87-98 City : Edition : Editors :
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