Do the Macroeconomic Forces Affect Stock Market Development? An Empirical Investigation from G-10 Economies

Abstract

The theoretical and empirical literature has demonstrated the critical and significant role of the stock market in developing the economy. The relationship between stock market development (SMD) and macroeconomic variables is examined in the current study using panel data of the top 10 developed countries from 2000 to 2019. The data have been tested using the panel ARDL approach. This study discovered a significant relationship between gross domestic product, Inflation rate, banking sector development, and stock market liquidity and the stock market development. While foreign direct investment has an insignificant relationship with stock market development. The gross domestic product, banking sector development, and foreign direct investment have a positive impact on the stock market development while the inflation rate and stock market liquidity have a negative impact on the stock market development of the G-10 economies. The study has some important practical implications.