Abstract
This paper investigates the macroeconomic drivers of the stock market development in Jordan during the period 1978-2016. The macroeconomic variables are represented by remittance inflows, investment, banking sector development, and level of income. The paper employs the ARDL bounds testing procedure to estimate the potential short run and long run relationships between the stock market development indicator and macroeconomic variables. The empirical results show that the macroeconomic variables positively and significantly affect the development of stock market in Jordan, except remittances which has a negative effect on the stock market development indicator. All signs and magnitudes are consistent with the literature.
Highlights
An increased interest in the relationship between macroeconomic variables and the development of stock markets were discussed by respective number of studies for many countries
Substantial attention given to study the relationship between stock markets and economic growth, there is a small number of empirical work studied the determinants of stock market development, especially in the developing economies such as Jordan
This paper contributes to the literature by conducting an empirical analysis using Autoregressive Distributed Lag (ARDL) model to examine both short run and long run relationships between the stock market development in Jordan and its main determinants, by employing recent time series and providing evidence whether macroeconomic variables lead to the stock market development
Summary
An increased interest in the relationship between macroeconomic variables and the development of stock markets were discussed by respective number of studies for many countries. The main role of the financial system is to facilitate saving borrowing transactions, it helps to improve funds allocation. It is approved, by many studies, that there is a significant relationship between stock markets and the economic growth. Substantial attention given to study the relationship between stock markets and economic growth, there is a small number of empirical work studied the determinants of stock market development, especially in the developing economies such as Jordan. This paper contributes to the literature by conducting an empirical analysis using ARDL model to examine both short run and long run relationships between the stock market development in Jordan and its main determinants, by employing recent time series and providing evidence whether macroeconomic variables lead to the stock market development.
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