The Role of Capital Markets in Economic Growth

Catalyst Institute Monograph Series

Posted: 30 Jan 1997

See all articles by Geert Bekaert

Geert Bekaert

Columbia Business School - Finance and Economics

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Marcio G. P. Garcia

Pontifical Catholic University - Department of Economics

Date Written: Undated

Abstract

Capital markets play an important role in the economic development of emerging capital markets. Well functioning markets insure that both corporations and investors get or receive fair prices for their securities. This ensures that valuable projects will be financed and negative value projects will be rejected. Most importantly, we argue that integration into world capital markets will accelerate the growth process. A country that erects to international participation will face a higher cost of capital. This discourages domestic investment and diminishes foreign direct investment. Our analysis indicates that Brazil's cost of equity capital could be lowered if an aggressive program is undertaken to increase the degree of integration with world capital markets.

JEL Classification: F32, 054

Suggested Citation

Bekaert, Geert and Harvey, Campbell R. and Garcia, Marcio G. P., The Role of Capital Markets in Economic Growth (Undated). Catalyst Institute Monograph Series. Available at SSRN: https://ssrn.com/abstract=9511

Geert Bekaert

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Campbell R. Harvey

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Marcio G. P. Garcia (Contact Author)

Pontifical Catholic University - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil
(5521) 274 2797 or 294 5490 (Phone)
(5521) 294 2095 (Fax)

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