LONG TERM RELATIONSHIP BETWEEN STOCK MARKET DEVELOPMENT AND ECONOMIC GROWTH IN SOUTH ASIA: PANEL DATA & ARDL MODEL ESTIMATIONS

Zia Ullah, Shahida Wizarat

Abstract


This paper aims to explore the contribution of stock market
development towards economic growth in case of four South Asian
economies, India, Bangladesh, Pakistan and Sri Lanka for the period 1990 to 2011. Using panel data to determine the long run (LR) as well as the short run (SR) relationship, we constructed an index by combining the components of stock market development by using the method of Principal Component Analysis (PCA). Our results suggest that stock market development leads to economic growth in the LR as well as in the SR and 88% percent disequilibrium is corrected within one year and the LR equilibrium is achievable in almost one year.

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