Abstract
This study explores the interplay between macroeconomic stability, government policies (transparency, anti-monopoly measures, legal frameworks), and financial market development. Drawing data from 125 countries over 11 years (2007-2017) with both parliamentary and presidential systems, various regression models are employed, including Ordinary Least Squares, Random and Fixed Effect Models. Prais-Winsten Regression addresses heteroskedasticity and autocorrelation. Results show a strong positive correlation between macroeconomic stability and financial market development. Transparent governance, anti-monopoly measures, and robust legal frameworks contribute significantly to both stability and financial growth. Transparent governance notably enhances the relationship between macroeconomic stability and financial market development globally and in presidential systems, but not in parliamentary systems. Effective anti-monopoly policies play a notable role in parliamentary systems, while legal frameworks maintain a positive influence across all scenarios. These findings are valuable for policymakers, investors, and researchers, informing their decision-making processes.
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