Discussion Paper

No. 2019-64 | November 18, 2019
Does stock market capitalization cause GDP? A causality study for Central and Eastern European countries

Abstract

This paper analyses the relationship between stock market capitalization and real GDP in ten Central and Eastern European countries (CEECs) that joined the European Union in 2004 and 2007, with the objective of determining if the financial markets have played a role as a driver of the economic development in these countries or vice versa. The methodology is based on the application of three different measures of causality between the relevant variables, in order to determine the existence and the direction of causality. Using a cointegrated Vector Autoregressive model (VAR), the authors study the relationship between the relevant variables through the following tests: Granger causality test, Toda-Yamamoto approach and Frequency Domain approach. The results obtained suggest evidence of the existence of this relationship, in both directions, in a significant number of this group of countries, and especially in those there is a long-term relationship.

Data Set

JEL Classification:

C32, F43, G15

Assessment

  • Downloads: 86

Links

Cite As

María A. Prats and Beatriz Sandoval (2019). Does stock market capitalization cause GDP? A causality study for Central and Eastern European countries. Economics Discussion Papers, No 2019-64, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2019-64


Comments and Questions


Anonymous - Referee Report 1
November 18, 2019 - 09:47

see attached file


Beatriz Sandoval - Reply to Referee Report 1
December 08, 2019 - 22:18

see attached file