Stock market development as a leading indicator of future economic growth in the BRICS countries

Klára Zálešáková

No 2022-82, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: This paper deals with the verification of the assumption of forecasting ability of stock indices in the BRICS countries. The literature review focuses on the definition of the financial and stock markets, measuring the economic performance and the interdependence of stock markets and economic growth. The analytical part is based on time series of GDP and stock indices of the BRICS countries, which are processed using correlation analysis, VAR models and Granger causality test, which is used to determine the existence and possible direction and strength of the causal relationship between the variables. The results show that the role of stock indices as a leading economic indicator is overestimated. However, GDP and stock indices interact, the strength and direction of causal relationships is affected by number of factors.

Keywords: BRICS; stock market; stock index; economic growth; GDP; correlation analysis; VAR model; causality; Granger test causality (search for similar items in EconPapers)
JEL-codes: C32 E44 F43 H54 (search for similar items in EconPapers)
Pages: 23
Date: 2022-09
New Economics Papers: this item is included in nep-cis, nep-fdg and nep-fmk
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