Stock Market Development and Economic Growth: ARDL Causality in Thailand

Abstract

This paper endeavors to investigate the relationship between the stock market development and economic growth in Thailand. The 61 quarterly data during the time period form March, 1995 to June, 2010 utilized in this study are the growth rate of Gross Domestic Product (GDP) of Thailand, the growth rate of Market capitalization of Government Bonds (BO) and the growth rate of Market capitalization of the Stock exchange of Thailand (MC). Two stationarity tests namely, DF-GLS test and Ng-Perron test are employed to find the integrating order of the variables which the results reveal that all variables are stationary at their level form or they have the integrated of order zero, I(0). To test long-run robustness, ARDL bounds testing technique is applied. The finding reveals that there exist a positive relationship stock market development and economic growth in Thailand implying that stock market development is an important ingredient for economic growth in Thailand. The finding of the study suggests that there is a need of policies toward rapid development of the stock market in Thailand.