The Determinants of Stock Market Development in Emerging Economies: Is South Africa Different?
IMF Working Papers, February 1, 2008
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Bibliographic details
- Authors: Charles Amo Yartey
- Published: February 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451868944.001
Summary
- Examines institutional and macroeconomic determinants of stock market development using a panel data of 42 emerging economies for the period 1990 to 2004.
- Concludes that determinants identified for emerging economies also explain the development of the stock market in South Africa.
Key empirical findings
- Important macroeconomic determinants:
- Income level
- Gross domestic investment
- Banking sector development
- Private capital flows
- Stock market liquidity
- Important institutional/political determinants:
- Political risk
- Law and order
- Bureaucratic quality
- Interpretation:
- Political risk, law and order, and bureaucratic quality enhance the viability of external finance.
- Resolution of political risk can be an important factor in the development of emerging stock markets.
Policy implications and recommendations (implied by findings)
- Strengthen institutional quality to enhance external finance viability:
- Reduce political risk
- Improve law and order
- Enhance bureaucratic quality
- Foster macroeconomic conditions that support market development:
- Raise income levels and gross domestic investment
- Support banking sector development
- Encourage private capital flows
- Improve stock market liquidity