The interdependence between stock market development and economic growth: a multi-country examination

Hana Bawazir (), Mukesh Kumar (), Saban Celik (), Khadija Abdulredha Abdulla () and Bora Aktan
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Hana Bawazir: University of Bahrain, College of Business Administration, Sakheer, 32038, Kingdom of Bahrain
Mukesh Kumar: University of Bahrain, College of Business Administration, Sakheer, 32038, Kingdom of Bahrain
Saban Celik: Izmir Katip Çelebi University, Faculty of Economics and Administrative Sciences, Çi?li Balatcik 33/2, ?zmir, Turkey
Khadija Abdulredha Abdulla: Tamkeen,70 Street Manama, Kingdom of Bahrain

Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, 2020, vol. 38, issue 2, 619-652

Abstract: This paper attempts to test the relationship between economic growth and equity market development in GCC region which is the Cooperation Council for the Arab States of the Gulf, namely, Saudi Arabia, Bahrain, the United Arab Emirates, Oman, Kuwait and Qatar over the period of 2000 and 2017. The Generalized Linear Mixed Model (GLMM) is adopted to find the nexus and the nature of the relationship. Compared to the conventional regression models, GLMM provides a more reliable conclusion accounting for the missing data and eliminate the country specific differences. The study finds a significant positive association between stock market liquidity (SML) and per capita real gross domestic product (GDP) but insignificant negative association between stock market capitalization (SMC) and GDP in the long run. The results also indicate that SML and SMC are significantly and positively correlated. Considering well-performing stock markets can enhance the nation’s wealth, reduce the over-dependence on oil as a major contributor to the economic growth, the results suggest that policy makers in the region ought to play more active role to stimulate their equity markets together with global integration.

Keywords: stock market development; economic growth; financial market; causality (search for similar items in EconPapers)
JEL-codes: G10 G20 O40 (search for similar items in EconPapers)
Date: 2020
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