Influence of Banking Sector and Stock Market Development on Economic Growth in Developing Countries
DOI:
https://doi.org/10.61143/umyu-jafr.1(1)2021.001Keywords:
Banks, Stock Market, Development, Developing Countries, Panel Co-integrationAbstract
This study examines the relative contributions of banking sector and stock market development on the economic growth of developing countries. It adopted panel co-integration and Fully Modified Ordinary Least Squares techniques and utilizes data on 20 developing countries over the period 1989 to 2010. The results show that the contribution of intermediated funds to the growth process is relatively more significant than that of the stock market. Moreover, banks and stock markets are found to be substitute rather than compliment in financing economic activities in these countries. Overall, financial development is found to be important contributor to the growth process as shown by the significant relationship between the ratio of broad money to GDP. Hence, it is recommended that these developing countries should deepen and strengthen their financial systems as well as promote financial integration both locally and across borders.
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