Stock Markets, Banks, and Economic Growth
Abstract
Using data on 49 countries from 1976 to 1993, the authors investigate whether measures of stock market liquidity, size, volatility, and integration in world capital markets predict future rates of economic growth, capital accumulation, productivity improvements, and private savings. They find that stock market liquidity-as measured by stock trading relative to the size of the market and economy - is positively and significantly correlated with current and future rates of economic growth, capital accumulation, productivity growth, even after controlling for economic and political factors. Stock market size, volatility, and integration are not robustly linked with growth. Nor are financial indicators closely associated with private savings rates. Significantly, banking development -as measured by bank loans to private enterprises divided by GDP -when combined with stock market liquidity predicts future rates of growth, capital accumulation, and productivity growth when entered together in regressions. The authors determine that these results are consistent with views that (1)financial markets and institutions provide important services for long-run growth, and (2)stock markets and banks provide different financial services.
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- Authors
- Levine, R., & Zervos, S.
- Affiliations
- National Bureau of Economic Research (US)
- Corresponding author
- Levine, Ross
- ORCID
- Levine, Ross
- Venue
- Policy Research Working Papers
- Publisher
- The World Bank
- Published
- 1999-11-30
- ISSN
- 1813-9450 (ISSN-L)
- OpenAlex
- W2144131031
- Cited by
- 2,881
- References
- 2
- Citations by year
- 2026: 26 · 2025: 82 · 2024: 115 · 2023: 183 · 2022: 141 · 2021: 169 · 2020: 147 · 2019: 155 · 2018: 130 · 2017: 135 · 2016: 131 · 2015: 126 · 2014: 135 · 2013: 107 · 2012: 115
- Type
- report
- Language
- en
- Open access
- closed
- Locations
- World Bank policy research working paper (publishedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
- Social Sciences › Economics, Econometrics and Finance › Finance › Finance, Markets, and Regulation
- Keywords
- stock liquidity, stock market size, stock market volatility, stock market integration, economic growth, capital accumulation, productivity growth, personal savings, banking sector development, cross-country growth determinants
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