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Does stock market capitalization cause GDP? A causality study for Central and Eastern European countries?

Maria Prats () and Beatriz Sandoval

Economics - The Open-Access, Open-Assessment E-Journal, 2020, vol. 14, No 2020-17, 29 pages

Abstract: This paper analyzes the relationship between stock market capitalization to GDP and real GDP in 10 Central and Eastern European countries (CEECs) that joined the European Union in 2004 and 2007, with the objective of determining whether the financial markets played a role as drivers of economic development in these countries or vice versa. The methodology, using a cointegrated Vector Autoregressive (VAR) model, is based on the application of three different measures of causality: Granger causality test, Toda-Yamamoto approach and Frequency Domain approach. The results obtained suggest evidence of a causal relationship in both directions between the variables in a significant number of countries, and especially in those where the variables show to be clearly cointegrated (Bulgaria, Hungary, Latvia, Romania, Slovakia and Slovenia).

Keywords: stock market development; economic growth; Granger causality; Toda-Yamamoto; frequency domain (search for similar items in EconPapers)
JEL-codes: C32 F43 G15 (search for similar items in EconPapers)
Date: 2020
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http://dx.doi.org/10.5018/economics-ejournal.ja.2020-17
https://www.econstor.eu/bitstream/10419/219999/1/170192210X.pdf (application/pdf)

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Working Paper: Does stock market capitalization cause GDP? A causality study for Central and Eastern European countries (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:202017

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