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The role of the Calderon-Rossell model on determining the developments of equity capital markets: A study of fragile five countries

Year 2015, Volume: 44 Issue: 1, 2 - 11, 30.04.2015

Abstract

Equity capital markets are important indicators in sharing information among investors, and in predicting firm value and fundamental economic parameters. Equity markets conducting these functions form a link between economic activities and financing. Therefore, development of equity markets plays an important role on the improvement of the global economy and finance. Especially, well functioning of capital markets possesses a separate importance for savings to be utilized effectively in the financial system and for the flow of funds in the system in emerging economies. The countries named as fragile five countries which are Brazil, India, Indonesia, South Africa and Turkey, with resemblance to each other due to their current account deficits, deterioration of government budget balance and loans granted at high levels, are studied with The Calderon-Rossell Model for the period of 2003-2013 in this article. For the development of equity markets, the analysis proves that real economic growth, turnover ratio, gross domestic savings and foreign direct investment variables have been statistically significant and have positive influence on the development of equity capital markets. On the other side, bank loans granted to private sector and inflation rate parameters have been statistically insignificant which proves that they have no effect on the development of equity capital markets.

References

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  • Choi, J., Hauser, S., & Kopecky, K. (1999). Does the stock market predict real activity? Time series evidence from the G-7 countries. Journal of Banking and Finance, 23, 1771-1792.
  • Demirguc-Kunt, A., & Levine, R. (1996). Stock markets, corporate finance, and economic growth: An overview. World Bank Economic Review, 10, 223-39.
  • Dickey, D. A., & Fuller, W. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74, 427- 431.
  • El-Wassal, A. K. (2005). Understanding the growth in emerging stock markets. Journal of Emerging Market Finance, 4, 227–261.
  • Enisan, A. A., & Olufisayo, A. O. (2008). Stock market development and economic growth: Evidence from seven sub-Saharan African countries. Journal of Economics & Business, 61, 162-171.
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  • Garcia, F. V., & Lin, L. (1999). Macroeconomic determinants of stock market development. Journal of Applied Economics, 2, 29-59.
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  • Gurley, J., & Shaw, E. (1955). Financial aspects of economic development. American Economic Review, 45, 515-537.
  • Gultekin, N. B. (1983). Stock market returns and inflation: Evidence from other countries. Journal of Finance, 38, 49-65.
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  • Global Financial Stability
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  • Levin, A., Lin, C. F., & Chu, S. J. (2002). Unit root tests in panel data: Asymptotic and finite sample properties. Journal of Econometric, 108, 1-22.
  • Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 35, 688-726.
  • Levine, R., & Zervos, S. (1996). Stock market development and long-run economic growth. World Bank Policy Research Paper, 582, 1-27.
  • Levine, R., & Zervos, S. (1998). Stock markets, banks and economic growth, American Economic Review, 88, 537- 58.
  • Madura, J., & Fox, R. (2011). International financial management, SecondEd., Cengage Learning.
  • Mansor, İ. H. (2011). Stock market development and macroeconomic performance in Thailand. Engineering Economics, 22, 230-240.
  • McKinnon, R. (1973). Money and capital in economic development, Washington D.C.: Brookings Institution.
  • Mishal, Z. A. (2011). Financial development and economic growth: Evidence from Jordan economy. Journal of Business & Economic Studies, 17(2), 20-35.
  • Naceur, B., Ghazouani, S., & Omran, M. (2007). The determinants of stock market development in the middle- eastern and North African region. Managerial Finance, 33, 477-489.
  • Nasseh, A., & Strauss, J. (2000). Stock prices and domestic and international macroeconomic activity:A cointegration approach. The Quarterly Review of Economics and Finance, 40, 229-245.
  • Osei, V. (2005). Does the stock market matter in ghana? A Granger-causality analysis, Bank of Ghana Working Paper, 5, 5-10.
  • Poon, S., & Taylor, S. J. (1991). Macroeconomic factors and the UK stock market. Journal of Business Finance & Accounting, 18, 619-39.
  • Shahbaz, M., Ahmed, M., & Ali, L. (2008). Stock market development and economic growth: ARDL causality in Pakistan. International Research Journal of Finance and Economics, 14, 182-195.
  • Shaw, E. S. (1973). Financial deepening in economic development, New York: Oxford University Press.
  • Singh, A. (1997). Financial liberalization, stock markets, and economic development. The Economic Journal, 107, 771-782.
  • Tachiwou, A. M. (2010). Stock market development and economic growth: The case of West African monetary union. International Journal of Economics and Finance, 2, 79-103.
  • Yartey, C. A. (2008). The determinants of stock market development in emerging economies: Is South Africa different? International Monetary Fund Working Paper, No: WP/08/32, 1-32.
  • Yartey, C. A. (2010). The institutional and macroeconomic determinants of stock market development in emerging economies. Applied Financial Economics, 20, 1615– 1625.
Year 2015, Volume: 44 Issue: 1, 2 - 11, 30.04.2015

Abstract

References

  • Baltagi, B. (2004). Panel data analysis, In M. Lewis-Beck, A. Bryman, & T. Liao (Eds.).
  • Baro, R. (1991). Economic growth in a cross-section of countries. Quarterly Journal of Economics, 106, 407- 444.
  • Calderon-Rossell, R. (1991). The determinants of stock market growth. In S. G. Rhee and R. P. Chang (Eds.), Pacific Basin Capital Markets Research Proceeding of The Second Annual Pacific Basin Finance Conference, 2, 4–6 June, Bangkok, Thailand.
  • Cherif, M., & Gazdar, K. (2010). Institutional and macroeconomic determinants of stock market development in MENA region: New results from a panel data analysis. The International Journal of Banking and Finance, 7, 139-159.
  • Choi, J., Hauser, S., & Kopecky, K. (1999). Does the stock market predict real activity? Time series evidence from the G-7 countries. Journal of Banking and Finance, 23, 1771-1792.
  • Demirguc-Kunt, A., & Levine, R. (1996). Stock markets, corporate finance, and economic growth: An overview. World Bank Economic Review, 10, 223-39.
  • Dickey, D. A., & Fuller, W. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74, 427- 431.
  • El-Wassal, A. K. (2005). Understanding the growth in emerging stock markets. Journal of Emerging Market Finance, 4, 227–261.
  • Enisan, A. A., & Olufisayo, A. O. (2008). Stock market development and economic growth: Evidence from seven sub-Saharan African countries. Journal of Economics & Business, 61, 162-171.
  • Fama, E. F. (1990). Stock returns, expected returns, and real activity, Journal of Finance, 45, 1089-1108.
  • Garcia, F. V., & Lin, L. (1999). Macroeconomic determinants of stock market development. Journal of Applied Economics, 2, 29-59.
  • Goldsmith, R. W. (1969). Financial structure and development, New Haven: Yale University Press.
  • Gurley, J., & Shaw, E. (1960). Money in a theory of finance, Washington: Brookings Institution.
  • Gurley, J., & Shaw, E. (1967). Financial structure and economic development. Economic Development and Cultural Change, 34, 333-46.
  • Gurley, J., & Shaw, E. (1955). Financial aspects of economic development. American Economic Review, 45, 515-537.
  • Gultekin, N. B. (1983). Stock market returns and inflation: Evidence from other countries. Journal of Finance, 38, 49-65.
  • Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115, 53-74. IMF,
  • Global Financial Stability
  • Report, http://www.imf.org/external/pubs (12.09.2014).
  • Kemboi, J. K., & Tarus, D. K. (2012). Macroeconomic determinants of stock market development in emerging markets: Evidence from Kenya. Research Journal of Finance and Accounting, 3, 57-68.
  • Levin, A., Lin, C. F., & Chu, S. J. (2002). Unit root tests in panel data: Asymptotic and finite sample properties. Journal of Econometric, 108, 1-22.
  • Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 35, 688-726.
  • Levine, R., & Zervos, S. (1996). Stock market development and long-run economic growth. World Bank Policy Research Paper, 582, 1-27.
  • Levine, R., & Zervos, S. (1998). Stock markets, banks and economic growth, American Economic Review, 88, 537- 58.
  • Madura, J., & Fox, R. (2011). International financial management, SecondEd., Cengage Learning.
  • Mansor, İ. H. (2011). Stock market development and macroeconomic performance in Thailand. Engineering Economics, 22, 230-240.
  • McKinnon, R. (1973). Money and capital in economic development, Washington D.C.: Brookings Institution.
  • Mishal, Z. A. (2011). Financial development and economic growth: Evidence from Jordan economy. Journal of Business & Economic Studies, 17(2), 20-35.
  • Naceur, B., Ghazouani, S., & Omran, M. (2007). The determinants of stock market development in the middle- eastern and North African region. Managerial Finance, 33, 477-489.
  • Nasseh, A., & Strauss, J. (2000). Stock prices and domestic and international macroeconomic activity:A cointegration approach. The Quarterly Review of Economics and Finance, 40, 229-245.
  • Osei, V. (2005). Does the stock market matter in ghana? A Granger-causality analysis, Bank of Ghana Working Paper, 5, 5-10.
  • Poon, S., & Taylor, S. J. (1991). Macroeconomic factors and the UK stock market. Journal of Business Finance & Accounting, 18, 619-39.
  • Shahbaz, M., Ahmed, M., & Ali, L. (2008). Stock market development and economic growth: ARDL causality in Pakistan. International Research Journal of Finance and Economics, 14, 182-195.
  • Shaw, E. S. (1973). Financial deepening in economic development, New York: Oxford University Press.
  • Singh, A. (1997). Financial liberalization, stock markets, and economic development. The Economic Journal, 107, 771-782.
  • Tachiwou, A. M. (2010). Stock market development and economic growth: The case of West African monetary union. International Journal of Economics and Finance, 2, 79-103.
  • Yartey, C. A. (2008). The determinants of stock market development in emerging economies: Is South Africa different? International Monetary Fund Working Paper, No: WP/08/32, 1-32.
  • Yartey, C. A. (2010). The institutional and macroeconomic determinants of stock market development in emerging economies. Applied Financial Economics, 20, 1615– 1625.
There are 38 citations in total.

Details

Primary Language English
Journal Section Makaleler
Authors

Funda Sezgin

Tülin Atakan This is me

Publication Date April 30, 2015
Published in Issue Year 2015 Volume: 44 Issue: 1

Cite

APA Sezgin, F., & Atakan, T. (2015). The role of the Calderon-Rossell model on determining the developments of equity capital markets: A study of fragile five countries. İstanbul Üniversitesi İşletme Fakültesi Dergisi, 44(1), 2-11.
AMA Sezgin F, Atakan T. The role of the Calderon-Rossell model on determining the developments of equity capital markets: A study of fragile five countries. İstanbul Üniversitesi İşletme Fakültesi Dergisi. April 2015;44(1):2-11.
Chicago Sezgin, Funda, and Tülin Atakan. “The Role of the Calderon-Rossell Model on Determining the Developments of Equity Capital Markets: A Study of Fragile Five Countries”. İstanbul Üniversitesi İşletme Fakültesi Dergisi 44, no. 1 (April 2015): 2-11.
EndNote Sezgin F, Atakan T (April 1, 2015) The role of the Calderon-Rossell model on determining the developments of equity capital markets: A study of fragile five countries. İstanbul Üniversitesi İşletme Fakültesi Dergisi 44 1 2–11.
IEEE F. Sezgin and T. Atakan, “The role of the Calderon-Rossell model on determining the developments of equity capital markets: A study of fragile five countries”, İstanbul Üniversitesi İşletme Fakültesi Dergisi, vol. 44, no. 1, pp. 2–11, 2015.
ISNAD Sezgin, Funda - Atakan, Tülin. “The Role of the Calderon-Rossell Model on Determining the Developments of Equity Capital Markets: A Study of Fragile Five Countries”. İstanbul Üniversitesi İşletme Fakültesi Dergisi 44/1 (April 2015), 2-11.
JAMA Sezgin F, Atakan T. The role of the Calderon-Rossell model on determining the developments of equity capital markets: A study of fragile five countries. İstanbul Üniversitesi İşletme Fakültesi Dergisi. 2015;44:2–11.
MLA Sezgin, Funda and Tülin Atakan. “The Role of the Calderon-Rossell Model on Determining the Developments of Equity Capital Markets: A Study of Fragile Five Countries”. İstanbul Üniversitesi İşletme Fakültesi Dergisi, vol. 44, no. 1, 2015, pp. 2-11.
Vancouver Sezgin F, Atakan T. The role of the Calderon-Rossell model on determining the developments of equity capital markets: A study of fragile five countries. İstanbul Üniversitesi İşletme Fakültesi Dergisi. 2015;44(1):2-11.