The Impact of macroeconomic determinants on stock market development in asian region: panel data analysis

Abstract

This study aims to investigate the role of macroeconomic determinants in stock market development in the Asian region. The empirical research was conducted using balanced panel data of eighteen Asian countries from 2009 to 2018. The econometric models used are Pooled OLS, Fixed Effects, and Random Effects. The study's findings include economic growth measured by per capita income, stock market liquidity measured by liquidity ratio, financial intermediaries' development measured by monetization ratio, and saving rate positively impacting stock market development. Furthermore, inflation measured by GDP Deflator is not an adequate indicator in measuring economic stability. Implications of the study are that policymakers and administrators can promote stock market development through enhancing stock market liquidity, developing financial intermediaries, and overall economic growth. Most of the economies in the Asian region are emerging economies; therefore, the economic environment and institutional environment of these economies are very different from that of developed economies. Further, equity markets in Asia have gone through many structural reforms in the past decade, and they account for 40% of the global equity market volume. Hence this study tries to identify the impact of macroeconomic determinants on stock market development specific to the Asian region.