Stock Markets: A Catalyst for Economic Growth

The stock market is a common feature of a current economy and it is reputed to achieve some necessary functions, which promote the growth and development of the economy. To achieve this objective, the endogenous growth literature and research, and recent theoretical studies have tried to provide a link between the literature of endogenous growth theory and financial markets. Providing evidence of stock market development will assist policy makers in designing reforms that do indeed promote the growth rate, enhancing stock market development as economic growth through to the banking system of financial sectors, and to the degree of investor’s right; furthermore, allowing risk sharing encourages speculative and productive investment (see, e.g. Greenwood and Jovanovic (1990) and Bencivenga and Smith (1991)). The results of the previous study, which established positive links between the stock market and economic growth, suggests the pursuit of policies geared towards rapid development of the stock market