Private capital flows,stock market and economic growth in developed and developing countries: A comparative analysis |
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Authors: | Chee-Keong Choong Ahmad Zubaidi Baharumshah Zulkornain Yusop Muzafar Shah Habibullah |
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Institution: | 1. Department of Economics, Faculty of Business and Finance, Universiti Tunku Abdul Rahman (Perak Campus), Jalan Universiti, Bandar Barat, 31900 Kampar, Perak Darul Ridzuan, Malaysia;2. Department of Economics, Faculty of Economics and Management, Universiti Putra Malaysia, 43400 Serdang, Selangor Darul Ehsan, Malaysia |
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Abstract: | Empirically we investigate how three types of private capital flows could promote economic growth in recipient developed and developing countries. Our focus is on the role of stock markets as a channel through which foreign capital flows could promote growth. The findings reveal that FDI exhibits a positive impact on growth, while both foreign debt and portfolio investment have a negative impact on growth in all sample countries. However, our results indicate that stock markets might be a significant channel or leading institutional factor through which capital flows affect economic growth. The findings provide clear implications that the negative impact of private capital flows can be transformed into a positive one if the stock market development has attained a certain threshold level, regardless of whether it is in developed or developing countries. |
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