Stock Market Performance and Economic Growth: Empirical Evidence from Pakistan employing the ARDL approach

Abstract

The impact of stock market on economic growth has always been a topic of scholarly inquiry. To study this relationship various methods are used, Autoregressive Distributed Lag is one of those methods which is employed in this study to investigate the impact of the stock market on the economic growth in the context of Pakistan. To investigate this relationship, independent variable is stock market performance and dependent variable is economic growth. Market capitalization is used as an indicator to measure stock market performance. The GDP is used as a proxy to measure economic growth of the country. The Data is collected from authentic sources of World Bank Indicators.  By analyzing these variable study aims to explain the short-term and long-term relationship between these variables. The conclusions of this study provide policy implications at national level and help investors in devising investment strategies. This study provides new insights on the finance-growth nexus and contributes to already existing body of knowledge. By unraveling these dynamics, this study is expected to provide worthy insights into the decision making process for various stakeholders, investing bodies, policymakers. Findings depicts positive short and long term association between stock market performance and economic growth that implies establishing the healthy stock market that in effect enhances economic growth.