Stock markets play an important role in economic development and growth.
Stock exchange markets enable publicly traded companies to raise investment capital through the sale of shares to investors. Research indicates that stock markets act as important catalysts for economic development and growth.
Identification
Liquidity, the ease with which assets can be converted to cash, is an important factor in the ability of a stock exchange to influence economic growth and development.
Effects
Liquid stock markets enable investors to sell shares easily, thus raising capital for firms and facilitating more long-term investments.
Expert Insight
Virginia economist Ross Levine, citing World Bank data, contends that nations with liquid stock markets grew more rapidly than those with illiquid markets.
Benefits
Economic globalization trends, which lowered barriers to international investing, enhanced the liquidity of world stock markets, enabling them to be a catalyst for development.
Geography
A 2006 study by two Nepalese economists found that stock markets play a significant role in influencing economic growth in less-developed countries, such as Nepal. However, they found that liquidity was not a significant factor and noted Nepal's small, illiquid stock market.
