The Macroeconomic Determinants of Stock Market Development in Selected European Countries: Dynamic Panel Data Analysis

Abstract

This paper is concerned with the effects of macroeconomic variables and their role in development of stock market in selected Europen countries by estimating a dynamic panel data for the period of 1995-2011. We found that income, monetazation ratio, liquidity ratio, saving rate and inflation effect on stock market development. Monetazation ratio and inflation have negative effects while income, liquidity ratio, saving rate have positive effects on stock market development. Liquidity ratio emphasizes that the stock market liquidity help to improve stock market development. Furthermore, income and saving rate are correlated with stock market growth.