Abstract
The present study examined the relationship between Amman stock exchange development measured by MarketCapitalization Ratio (MCR) and Value Traded Ratio (VTR) and Jordan economic growth measured by GrossDomestic Product Growth (GDPG) for the period 1978–2012. The study used Vector Error Correction Model(VECM) to examine the hypotheses. The study indicated that there is a positive and significant relationshipbetween Amman stock exchange development and Jordan economic growth. In addition, the pairwise Grangercausality test shows that there is a unidirectional causality running from market capitalization ratio and valuetraded ratio to economic growth.
Highlights
The economic growth in the modern concept jointed to an efficient and active financial sectors
The Augmented Dickey Fuller test is run for the variables: Gross Domestic Product Growth (GDPG), Market Capitalization Ratio (MCR) and Value Traded Ratio (VTR)
The current study investigated the relationship between Amman Stock Exchange development measured by Market Capitalization Ratio (MCR) and Value Traded Ratio and Jordan economic growth (GDPG)
Summary
The economic growth in the modern concept jointed to an efficient and active financial sectors. According to Alile (1984), the capital market is an institution that participates to the economic growth through different essential roles play in the economy, such as channelling resources, promoting reforms to modernize the financial sectors, financial intermediation capacity to link deficit to the surplus sector of the economy, and a veritable tool in the mobilization and allocation of savings among competitive uses, which are critical to the growth and efficiency of the economy. Ekundayo (2002) suggests that nations required domestic and foreign investment to achieve sustainable economic growth and development. The well-developed stock market considered as one important institution to attract domestic and foreign investments (Pat & Odia, 2010)
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