Assessing Country Risk in the Stock Market and Economic Growth Nexus: Fresh Insights from Bootstrap Panel Causality

Sami Ur Rahman, Faisal Faisal, Adnan Ali, Nur Naha Abu Mansor, Zahoor Ul Haq, Hamid Ghazi H Sulimany, Suresh Ramakrishnan

    Research output: Contribution to journalArticlepeer-review


    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.
    Original languageEnglish
    Pages (from-to)294-302
    Number of pages9
    JournalQuarterly Review of Economics and Finance
    Publication statusPublished (VoR) - 23 Feb 2024


    • Stock market development
    • Konya causality
    • economic growth
    • CS-ARDL
    • country risk


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