The Effect of Key Macroeconomic Variables on Market Capitalization in Selected Emerging Markets: Post 2007-08 Crisis Era

Abstract

Stock market developments are of high importance both for developed and developing countries. Determinants of stock market development are studied under two main approaches in the literature in terms of macroeconomics: institutional structure and key macroeconomic variables. While the studies regarding the first provided rather consistent results, the studies regarding the second have not come to a well-accepted consensus, at least for the majority of the key macroeconomic variables. This study aims to find out post-crisis determinants of stock market development in 2009-2017 for selected 31 emerging markets, using generalized method of moments (GMM) technique in two separate models. The estimation results show that for the countries in hand and for the period specified, the level of openness and the exchange rate have been the key macroeconomic determinants of market capitalization.