Abstract
Considering economic growth and banking sector development as economic factors and tertiary level of education as a social factor, this paper explores their effect on stock market development in Bangladesh during the period 1976 to 2015. This paper reveals a significant positive impact of banking sector development and economic growth and an insignificant positive impact of tertiary level of education on stock market development both in the short-run and in the long-run. The positive long-run effect of socioeconomic factors on stock market development suggests that over time the rise in tertiary education, economic growth, and banking sector development contributes into the stock market development. Hence, government should give special attention into the development of tertiary education in addition to accelerating economic growth and banking sector development to ensure broad base stock market.
Highlights
Consumption growth, investment growth, and export growth- of an economy have the largest effect on the unemployment (Banerji et al 2015)
The economic growth causes stock market development and stock market development causes banking sector development have been found by the past studies
This paper finds out the importance of tertiary level of education on the stock market development during the period 1976 to 2015 considering the effect of economic growth and banking sector development
Summary
Consumption growth, investment growth, and export growth- of an economy have the largest effect on the unemployment (Banerji et al 2015). Okun’s Law proposed that «a one percent increase in unemployment is associated with a three percent decrease in output» (Okun 1962). Harvard economist (Mamkiw 1994) assures the Okun’s Law after a slight change that «a one percent increase in unemployment is associated with a two percent decrease in output». Stock market development raises the consumption, investment, and export growth of an economy, eventually creating more opportunities of employment (Thomas 2006). With the high association of the stability of economic growth, a stock market attracts investors from home and abroad to invest that eventually creates opportunities for expanded production, export, employment, and so on through spreading risk and making availability of long-term capital (Shahbaz et al 2008).
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