Acta Univ. Agric. Silvic. Mendelianae Brun. 2016, 64, 1927-1936
Published online 2016-12-21

Stock Market Development and Economic Growth: Evidence from the European Union

Veronika Kajurová, Petr Rozmahel

Department of Economics, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic

The paper examines the causal relation between the stock markets development and economic growth in the EU countries. In particular, the nature and causality direction is investigated. Panel data techniques including cointegration tests, vector error correction models and Granger causality tests were applied to indicate the nature and direction of causality. Long‑run effects of the economic growth upon stock market development was detected in the sample of the Euro area member countries. In addition, the short‑run mutual relations between growth and stock markets were indicated in that country‑sample. In the non‑Euro area countries, only short‑run impact of the stock market development upon economic growth was found. The empirical findings bring up implications for macroeconomic stabilization and development policies. The indicated relations also play a role in predicting economic growth and stock markets’ development.


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