Journal of Economics and Development Studies

Can Stock Market Development boost Economic Growth in Developing Economies? The Case of Egypt
Osama M. Badr

Abstract
This study investigates the causal relationship between stock market development and economic growth in Egypt. To achieve this objective, unit root tests were conducted for time series data for the period of 2002 to 2013 in their levels and their first differences according to Dickey-Fuller test, Johansen co-integration analysis was conducted to examine whether the variables are co-integrated of the same order. Vector Auto regression Estimates (VAR) was chosen to test the long-run relationship between stock market development and economic growth. VAR Granger Causality test was applied to determine the direction of causality between the examined variables. Finally, Variance Decomposition (VD) and Impulse Response Function (IRF) were used for forecasting the future relationship between the study variables. The results do not indicate a causal relationship between stock market development alone and the economic growth. However, the results show a link between stock market development as well as foreign direct investment and economic growth. Therefore, it can be inferred that government should reshape and adjust the stock market and take care of FDI to support economic growth.

Full Text: PDF     DOI: 10.15640/jeds.v3n1a9