Developed financial markets serve as a catalyst for sustainable economic growth, fostering job creation and supporting progress in line with Sustainable Development Goal 8 (SDG 8). For developing economies, adopting growth principles from advanced markets can provide valuable strategies for strengthening financial market development.
This study examines the impact of financial market development on economic growth in ASEAN and Central & Eastern European (CEE) countries between 2002 and 2019. Annual time-series data were obtained from the World Bank, focusing on stock market development indicators. Using a panel data random effect model, the research assesses the correlation between stock market performance and economic growth.
The results show that market capitalization and the total value of stocks traded have a positive impact on economic growth. However, the study also reveals a negative relationship between domestic share trading activity and GDP growth. These findings suggest that while vibrant and well-capitalized markets contribute to growth, excessive short-term trading may hinder long-term economic stability.
For sustained development, policymakers should prioritize strengthening financial market structures while ensuring macroeconomic stability. Doing so will help economies harness the full potential of financial markets to support inclusive and sustainable growth.
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