THE NEXUS BETWEEN ECONOMIC GROWTH, STOCK MARKET DEPTH, TRADE OPENNESS, AND FOREIGN DIRECT INVESTMENT: THE CASE OF ASEAN COUNTRIES

Rudra P. Pradhan, Mak Arvin and John H. Hall ()
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Rudra P. Pradhan: Vinod Gupta School of Management, Indian Institute of Technology Kharagpur, IIT, Karagpur, West Bengal 721302, India
John H. Hall: Department of Financial Management, University of Pretoria, Pretoria 0028, Republic of South Africa

The Singapore Economic Review (SER), 2019, vol. 64, issue 03, 461-493

Abstract: Many studies have investigated the causal relationship between economic growth and the depth in the stock market, between economic growth and trade openness, or between economic growth and foreign direct investment. Advancing on earlier work, this paper uses vector error-correction and cointegration techniques in order to establish whether there is a long-run equilibrium relationship between all four variables. We consider a sample of 25 ASEAN Regional Forum (ARF) countries which are studied over the period 1961–2012. Our analysis, which combines various strands of the literature, establishes the direction of causality between the variables. Policy recommendations include the encouragement of mutual fund investment by smaller investors to increase stock market depth as well as methods to increase foreign direct investment, such as tax holidays.

Keywords: Economic growth; stock market depth; trade openness; foreign direct investment; panel Granger causality tests; ASEAN countries (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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DOI: 10.1142/S0217590817500175

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