英语论文网

rowth brings about stock market development in France. This suggests that economic growth has a positive effect on stock market development and that stock market growth is driven by economic growth.

Deb and Mukherjee (2008) on their part investigate the causal relationship between stock market development and economic growth for the Indian economy using quarterly data for the period 1996 to 2007. They use real GDP growth rate as a proxy for economic growth and real market capitalization ratio, real total value traded ratio and stock market volatility as stock market indicators. Applying Granger non-causality test proposed by Toda and Yamamoto (1995) to determine the direction of causality, the results suggest a bi-directional causation between real stock market capitalization ratio and economic growth at 1% significance level. The implication of both studies is that economic growth and stock market development are mutually dependent. Moreover, both studies find that economic growth leads to stock market development measured by stock index and value traded ratio at 5% level of significance in Pakistan and India, respectively. Hence, given these divergent views and results, the debate in the literature on the link between stock markets and the economic development remain inconclusive.

CHAPTER 3

METHODOLOGY

3.1 Data Sources

This study uses annually data with the sample period from 1982 to 2011. Due to availability of data, the sample period for each country used is as follows: Indonesia, Malaysia, the Philippines, and Thailand (1988-2011) and Singapore (1982-2011). There consists of two variables which stock market is measured by share prices whereas, GDP have used in levels as a measure for economic development. For the usual statistical reasons, all the variables in the data set are transformed into natural logarithms.

All variable was annually data taken from five ASEAN countries stock exchange. The data for share price of each five ASEAN countries composed from Jakarta Stock Exchange (SE) Composite, Kuala Lumpur Composite Index (KLCI), Straits Times Index (STI), Philippines Stock Exchange (SE) Composite and Bangkok Stock Exchange of Thailand (SET) with the economic development by examining the causal effect of the five ASEAN countries, whereas, GDP data are compiled from World Development Indicators (WDI). All the variables are in constant local currency units.

Empirical Method

In light of the existing literature, the theoretical model used to examine the relationship between stock market and economic development is:

Y = a0 + b1SP +ε............................................................................ (1)

where Y is log (GDP) and SP is log (SP).

3.2.1 Co-integration Test: The ARDL – Bound approach

The study uses ARDL – Bounds testing approach is used to examine the long run co-integration relationship between each of the two proxies of share price and GDP. The ARDL modelling approach was originally introduced by Pesaran and Shin (1999) and later extended by Perasan et al. (2001). In Pesaran and Pesaran (1997) and Pesaran et al. (2001) report two sets of critical values for a given significance level. If the F-statistic value will be evaluated with the critical values tabulated in Table CI (III) of Pesaran et al. (2001) where if the value fall between t