Stock Market Liquidity and Economic Growth: A Critical Appraisal of the Levine/Zervos Model

PERI Working Paper No. 47

12 Pages Posted: 18 Dec 2002  

Andong Zhu

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics

Michael Ash

UMass-Amherst - Department of Economics; CPPA, UMass-Amherst

Robert Pollin

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics

Date Written: 2002

Abstract

Levine and Zervos (1998) presented cross-country econometric evidence showing that, in a sample of 47 countries, stock market liquidity contributed a significant positive influence to GDP growth between 1976-93. We show that the Levine-Zervos results are not robust to alternative specifications because of the incomplete manner in which they control for outliers in their data. We show that when one properly controls for outliers, stock market liquidity no longer exerts any statistically observable influence on GDP growth.

Suggested Citation

Zhu, Andong and Ash, Michael and Pollin, Robert, Stock Market Liquidity and Economic Growth: A Critical Appraisal of the Levine/Zervos Model (2002). PERI Working Paper No. 47. Available at SSRN: https://ssrn.com/abstract=353366 or http://dx.doi.org/10.2139/ssrn.353366

Andong Zhu

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics ( email )

10th Floor Thompson Hall
Amherst, MA 01003
United States

Michael Ash

UMass-Amherst - Department of Economics ( email )

10th Floor Thompson Hall
Amherst, MA 01003
United States

HOME PAGE: http://www.umass.edu/economics

CPPA, UMass-Amherst

Department of Operations and Information Managemen
Amherst, MA 01003
United States

HOME PAGE: http://www.masspolicy.net

Robert Pollin (Contact Author)

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics ( email )

940 Thompson Hall
Amherst, MA 01003
United States
413-577-0126 (Phone)

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