The impact of stock market on economic growth thesis

The promotion of rapid capital formation and real investment culture as against short term portfolio investments. In recognition of the importance of the stock market in economic development, many developing countries have launched stock exchanges during the past few decades. Inflation is the rate at which the price of goods and services increases.

Higher interest rates mean that money becomes more expensive to borrow. Any significant change in GDP- up or down- usually has a significant effect on the direction of the stock market. The causality tests also confirm the positive effects of stock market development on economic growth.

In recognition of the above, the research questions for this study are: This compares with the money market, which represents the short- end of the financial system that provides facilities for claims and obligations whose maturity vary from one day to one year.

Over the years, the Nigerian Stock market has experienced relative stability and recorded impressive growth. It is the result of several factors, including a rise in the cost of manufacturing, transporting and selling goods.

The Consumer Price Index points out the average change in the price of consumer goods and services across more than different categories. At the same time, higher PPI numbers could prevent a firm from expanding or hiring more workers, as the cost of producing goods increases.

It is a market for long term funds for development. Has the market acted as a mechanism for attracting foreign capital inflow. Using the independent variables of market capitalization, value of trade, inflation rate and exchange rate and the dependent variable of gross domestic product, this study analyzes the impact of the stock market on the Nigerian economy.

The development of stock market in Nigeria, as in other developing countries has been induced by the government. In conclusion, the result shows that the stock market has a highly significant impact on the Nigerian economy.

At the same time, lower GDP measurements can have the opposite effect on stock prices as businesses begin to suffer. Adedipe The capital market can also be defined as the aggregation of institutions and mechanisms through which long term funds are mobilized and used for development purposes Obadan The capital market, given the long term horizon and liquidity offered by its secondary market, provides the best framework for the mobilization of resources — G.

The most popular difference that may exist arises from both geographical and physical location and background of the people.

While deflation sounds like it should be welcomed by investors, it actually causes a drop in the stock market because investors perceive deflation as the result of a weak economy. Has the growth of the Nigerian Stock Market promote economic growth in Nigeria. These factors explained above in fact rendered the stock exchange as an impact in real economic sector not to perform it uses in the role and development of economy.

At first sight, the stock market development seems to have had a negative impact on South Africa's development; while savings, investment and growth deteriorated, the stock market grew.

The long-term increases in the growth theory rather than the short term fluctuations are found in Keynesian theory of income determination. However, the Nigerian stock Exchange operates and manages the activities of the capital market.

Like GDP, rate of employment illustrates the development and the strength of the economy. Moreover, the analyses show that external equity finance gained importance during the considered period and that private investments reacted positively to the stock market development.


Hence, without an efficient stock market, the economy may be starved of the required long term funds for sustainable growth and development. The degree of effectiveness and efficiency of the market will determine the extent to which it will contribute to the process of economic growth and development.

This should be based on the premises so that some explanations would be made to some specific problems. While deflation sounds like it should be welcomed by investors, it actually causes a drop in the stock market because investors perceive deflation as the result of a weak economy.

Foreign Markets Economic trends in foreign markets can have an effect on the stock market in the United States, according to the article titled "Riding the Economic Roller Coaster" published in "Inc.

From the set of investment and capital movement in Nigeria, the market have tried in this much, but its important roles, development must be seen to be spread far and wide of the country for security, development.

For investors, periods of high consumer and producer inflation can spell the death knell for corporate profits. Apr 21,  · If one looks at a chart which shows the relationship between economic growth and stock market valuations one year later (and we happen to have one on hand), one sees that such an approach is worse.

Since the stock market is a vote of confidence, a crash can devastate economic growth. Lower stock prices mean less wealth for businesses, pension funds, and individual investors. Companies can't get as much funding for expansion.

1. The impact on the U.S. stock market 2. The impact on U.S.

How does GDP affect stock prices?

economic growth 3. The impact on consumer confidence in the form of spending 4. The impact on foreign direct investment in the United States 5.

The impact on fiscal policy and budgetary resources In the end, this analysis will show just how resilient the US economy is when faced with a crisis. The stock market affects gross domestic product (GDP) primarily by influencing financial conditions and consumer confidence.

When stocks are in a bull market, there tends to be a great deal of. This study sought to investigate the impact of stock exchange market to the economic growth in Tanzania over a period of - A simple regression model using the annual data sets was employed. The empirical findings show that the market size has a negative impact on economic growth.

impact of stock markets on economic growth. Levine () and Bencivenga et al. () propose models in which more liquid markets stimulate long-term investment and economic determinants of growth of the Polish stock market. The paper is organised as follows. Section 1 briefly describes the general conditions of the.

Stock market development and economic growth in emerging economies The impact of stock market on economic growth thesis
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The Impact of the Stock Market on GDP | Investopedia