STOCK MARKET DEVELOPMENT AND ECONOMIC GROWTH: AN EMPIRICAL ANALYSIS FOR TUNISIA

Sana Ayachi Jebnoun, Mohamed Rafaa Chebbi

Abstract


This paper examines the influence of the Tunisian stock market development on economic growth. We perform a time series investigation for the period 1998-2018 using four measures of stock market development: total value traded to GDP; market capitalisation to GDP; stock market turnover ratio, and stock market depth. GDP growth rate is used as a proxy for economic growth. Since the series are non-stationary, we perform the cointegration test and use the ECM method developed by Engle-Granger to consider both short-term and long-term dynamics. Our findings report that the ratio of the total value of trades divided by GDP and the turnover ratio have a positive long-run effect on economic growth at the 10% significance level. This result supports the hypothesis of the importance of liquidity in promoting investment and long-run economic growth. The results also reveal that in the short term, stock market development does not have a significant impact on Tunisia’s economic growth.

 

JEL: G10, G12, O40, C22

 

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Keywords


stock market development, economic growth, Tunisian Stock Exchange, ECM

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References


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DOI: http://dx.doi.org/10.46827/ejefr.v9i1.1966

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