Does Stock Market Development Promote Capital Accumulation?

This study is based on the analysis of panel data for 23 countries in the presence of cross-country dependence. It uses the second-generation tests for unit root and cointegration. This paper fits (Dynamic) Common Correlated Effects - Mean Group (CS-ARDL) and Pooled Mean Group (CS-ECM)) models and finds no meaningful relationship between each of the four indicators of stock market development (such as market capitalisation, stock trading, turnover ratio and stock market listing of firms) and fixed capital accumulation. Thus, it questions the conventional wisdom manifested in the mainstream research works, which are by and large cross-sectional