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The dynamics of bondmarket development, stockmarket development and economic growth: Evidence from the G-20 countries

Rudra Pradhan (), Mak Arvin (), Neville Norman and Sahar Bahmani
Additional contact information
Rudra Pradhan: Indian Institute of Technology Kharagpur
Neville Norman: University of Melbourne
Sahar Bahmani: University of Wisconsin

Journal of Economics, Finance and Administrative Science, 2020, vol. 25, issue 49, 119-147

Abstract: Purpose – 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. Design/methodology/approach – 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. Findings – 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.

Keywords: Bond market development; Stock market development; Economic growth; G-20 countries; 20 countries (search for similar items in EconPapers)
JEL-codes: C33 D53 E31 E43 F43 (search for similar items in EconPapers)
Date: 2020
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