Paper 5
The authors stated that the income level has to have a positive impact on stock market development. To identify whether the data is 100% true they use the previous year’s income level. Also the authors calculate the saving rate used a ratio of gross saving to GDP. The investment rate is considered as the important determinant of stock market development and calculated by using ratio of gross fixed capital to GDP. Financial Intermediary development is another determinant which plays an important role in stock market development like Stock Market Liquidity and Macroeconomic Stability.
Conclusion
The authors of all of the papers referenced in this assignment agree on that the determinants of the stock market development are the same. However some papers mentioned about the foreign investment rate as one of the important determinants and it is a mistake to not include it in the list. Also there are some more important determinants such as the politics of the partner country. For example if Poland changes its interest rate Russian economics will face the changes also because of Russia supplies Poland with the gas. There are a lot more determinants such as bad news, disasters, employment rates, non-farm payrolls and changes in currency rate however they are less important than the determinants mentioned in the papers.
References
Demirguc-Kunt, Asli, and Ross Levine, 1996, “Stock Markets, Corporate Finance and Economic Growth: An Overview,” The World Bank Economic Review, Vol. 10 (2), pp. 223–239.
Demirguc-Kunt, Asli, and Ross Levine, 1996, “Stock Markets, Corporate Finance and Economic Growth: An Overview,” The World Bank Economic Review, Vol. 10 (2), pp. 223–239.
Demirguc-Kunt, Asli, and Vojislav Maksimovic, 1998, “Law, Finance, and Firm Growth,” Journal of Finance, Vol. 53, pp. 2107–2137
Garcia, F. Valeriano, and Lin Liu, 1999, “Macroeconomic Determinants of Stock Market Development,” Journal of Applied Economics, Vol. 2 (1), pp. 29–59.
King, G. Robert and Ross Levine, 1993, “Finance and Growth: Schumpeter Might be Right,” The Quarterly Journal of Economics, Vol., 108 (3), pp. 717–737.
Miller, Merton. 1991. Financial Innovations and Market Volatility. Blackwell, Cambridge.
Modigliani, F., and Miller, M.H. 1958. “The Cost of Capital, Corporation Finance, and the Theory of Investment” American Economic Review, 48 (3): 261-297/
Shaw, Edward, 1973, Financial Deepening in Economic Development, (New York: Oxford University Press).
Rousseau P and Sheng X, 2007. Banks, stock markets, and China's ‘great leap forward’ Emerging Markets Review Volume 8, Issue 3, September 2007, Pages 206‐217
Tsuru K., 2000. Finance and Growth: Some theoretical considerations, and a review of the empirical literature, Economics Department Working papers no 228.
Appendices
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