TY - JOUR
T1 - Assessing Country Risk in the Stock Market and Economic Growth Nexus: Fresh Insights from Bootstrap Panel Causality
AU - Rahman, Sami Ur
AU - Faisal, Faisal
AU - Ali, Adnan
AU - Mansor, Nur Naha Abu
AU - Ul Haq, Zahoor
AU - Sulimany, Hamid Ghazi H
AU - Ramakrishnan, Suresh
PY - 2024/2/23
Y1 - 2024/2/23
N2 - Investigating the nexus between the stock market and the real economy is vital, as financial markets can play a critical role in economic growth. However, the country's risk factors (political, economic and financial) influence economic growth and financial markets? nexus. This study examines the role of stock market development and country risk (political, economic and financial) on economic growth, and the moderating influence of country risk in the stock market and economic growth nexus in BRICS economies (except Russia) over the period of 2000 to 2020. The study employed various latest econometrics techniques, including Covariate Augmented Dickey-Fuller (CADF) for identifying unit root problem, Westerlund (2007) test for examining long-run relationship, Cross-sectional auto-distributive lag (CS-ARDL) for estimating long-run relationship, and finally, Konya (2006) for identifying the causal relationship among the variables. The study explored that financial risk, economic risk and political risk is negatively associated with economic growth. However, stock market does not play a significant role in economic growth in this case. The study highlighted a bi-directional causality between economic growth and stock market development. The study also suggests a unidirectional causality from political, economic and financial risk towards economic growth. Finally, the study suggests some policy recommendations based on the empirical results.
AB - Investigating the nexus between the stock market and the real economy is vital, as financial markets can play a critical role in economic growth. However, the country's risk factors (political, economic and financial) influence economic growth and financial markets? nexus. This study examines the role of stock market development and country risk (political, economic and financial) on economic growth, and the moderating influence of country risk in the stock market and economic growth nexus in BRICS economies (except Russia) over the period of 2000 to 2020. The study employed various latest econometrics techniques, including Covariate Augmented Dickey-Fuller (CADF) for identifying unit root problem, Westerlund (2007) test for examining long-run relationship, Cross-sectional auto-distributive lag (CS-ARDL) for estimating long-run relationship, and finally, Konya (2006) for identifying the causal relationship among the variables. The study explored that financial risk, economic risk and political risk is negatively associated with economic growth. However, stock market does not play a significant role in economic growth in this case. The study highlighted a bi-directional causality between economic growth and stock market development. The study also suggests a unidirectional causality from political, economic and financial risk towards economic growth. Finally, the study suggests some policy recommendations based on the empirical results.
KW - Stock market development
KW - Konya causality
KW - economic growth
KW - CS-ARDL
KW - country risk
UR - https://www.open-access.bcu.ac.uk/15347/
M3 - Article
SN - 1062-9769
VL - 94
SP - 294
EP - 302
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
ER -