The Stock Market And Economic Growth: The Effect And Experience

This paper discusses the roie and effect of stock market in economic growth. In current economic growth model, more and more variables are made endogenous to explain their influences on economic growth. But the booming stock market has not been made endogenous in the theory, and its empirical result is robust in general.Interest rate being endogenous may be the undiscovered way of stock market' s growth effect. The assumption of the same and constant interest rate is unrealistic. As is known to all the distinguished character of the banking sector is the different interest rate between the lending and borrowing which change the saving rate, the capital accumulation and growth rate. And the stock market makes such interest rate gap endogenous. That the interest rate is never constant will influence the consumer's choice on consumption path and therefore change the saving rate, the capital accumulation and growth rate. The micro foundation of stock market's long- run growth effect is that stock market provides a mechanism of information incentive.Its role has been confirmed by making stepwise regression analysis using 97 countries ' data, which shows stock market can not only accelerate growth but also promote convergence. It is the same with the theory that stock market will promote the mobility of capital , therefore deduce economy convergence.Some complex findings are found in the positive analysis of uneven stock market development and economic growth. From the time series ( 1992 - 1999), the development of stock market is uneven and rapid, and its growth effect is not clear. And the panel study of China's provincial growth shows dispersion of regional gap from 1992 to 1999, and the stock market strengthen this trend. But maybe there exist some " club convergence".