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STOCK MARKET AND BANKING SECTOR: ARE THEY COMPLEMENTARY FOR ECONOMIC GROWTH IN LOW HUMAN DEVELOPED ECONOMY?
Abstract. In this study, the impact of stock market and banking sector development on economic growth is investigated by applying mean and common mean group estimators on the sample from 1989 to 2013 for low human developed countries. The empirical findings represent that among the proxies of banking sector development only credit to private sector leaves positive and significant effect on economic growth in case when it interacts with all the three proxies of stock market development. However, traded stocks and turnover ratio are significantly enhancing economic growth in case when these interact with banking sector development. This study also finds that both stock market and banking sector development are together required to increase economic growth in low human developed countries. This study also confirms the evidence of Lewis (1954) model for the selected countries. Lastly, this study proposes that credit to private sector from banking sector development in the light of stock market development must be given prime importance if economic growth is to be targeted in low human developed countries.
Keywords: Stock Market Development, Banking Sector Development, Economic Growth, Low Human Developed Countries