The Determinants of Stock Market Development in Emerging Economies: Is South Africa Different?

33 Pages Posted: 18 Feb 2008

Date Written: February 2008

Abstract

This paper examines the institutional and macroeconomic determinants of stock market development using a panel data of 42 emerging economies for the period 1990 to 2004. The paper finds that macroeconomic factors such as income level, gross domestic investment, banking sector development, private capital flows, and stock market liquidity are important determinants of stock market development in emerging market countries. The results also show that political risk, law and order, and bureaucratic quality are important determinants of stock market development because they enhance the viability of external finance. This result suggests that the resolution of political risk can be an important factor in the development of emerging stock markets. The analysis also shows the factors identified above as determining stock market development in emerging economies can also explain the development of the stock market in South Africa.

Keywords: Emerging markets, South Africa, Stock markets, Income, Investment, Savings, Banking sector

Suggested Citation

Yartey, Charles Amo, The Determinants of Stock Market Development in Emerging Economies: Is South Africa Different? (February 2008). IMF Working Paper No. 08/32, Available at SSRN: https://ssrn.com/abstract=1094214

Charles Amo Yartey (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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