Impact of Stock Market Development and Bank Sector Development on Economic Growth: Evidence from South Asian Association for Regional Cooperation (SAARC) Countries

This study aims to investigate the impact of both the stock market and bank sector development on economic growth for four selected SAARC countries. An empirical study for the period 2003-2018 is performed employing the system GMM (SYS-GMM) technique. This study uses MK and STA as stock market development fundamentals, DCP, LL, DEPO and BCD as banking sector development forces, and four selected macroeconomic control variables. Findings of this paper confirm an affirmative relationship between stock market expansion, bank sector development, and economic progress. Essentially, it is evident that LL and STA significantly influence economic growth in the selected four SAARC countries. Particularly, this study supports the significance of both the stock market and bank development for economic growth. Therefore, decision-makers should take required measures toward simultaneous development of both stock markets and banks for encouraging economic development in the SAARC region.

Anahtar Kelimeler:

Stock Market Development, Banking Sector Development, Economic Growth, SAARC Countries, Generalized Method of Moments (GMM)

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