Impact of Stock Market Development on Economic Growth: Evidence From SAARC Countries

Abstract

The benefit of stock market development for the economy an irreversible issue in modern economic theory. The paper empirically makes an attempt to estimate his impact of stock Market development on economic growth in the SAARC region by the two dynamic panel Models for the period of 1980 to 2008. The first model tries to assess the stock market Effect directly after controlling for other variables whereas the second one does it by having its influence through investment. The study finds that none of the dynamic model is Effective to identify the stock market linkage to per capita growth rate in the SAARC Region. This implies that stock market size, activity and liquidity do not have any influence On the real economic activity in the region. The results did not lead support to empirical studies of Levive (l991), Levine & Zervos (1996, 1998), Islam (1998) as well as other studies and theory that stock market has direct association with per capita growth rate. The main reasons identified that fund mobilized by stock market in the region is still in Transitional period and it is very small relative to its economy.