This paper has two goals. The first goal is to investigate the influence of stock market development on economic growth for a group of 14 transition economies from the Central and South-East European (CSEE) region in the period 2002-2012, while the second is to analyze the main characteristics and specificities of the stock market in the Republic of Macedonia. To fulfil the first goal, we apply panel regression models (fixed and random effects) and a dynamic panel model (Generalized Method of Moments – GMM), while we use a single country approach and comparative analysis to examine the main characteristics of the Macedonian stock market. The estimated results indicate that stock market development is positive and significantly correlated with economic growth. Additionally, the comparative analysis of the stock market in the Republic of Macedonia suggests that the Macedonian stock market is still underdeveloped and faces a number of challenges before it can enter a new phase of development after the negative impact of the global financial crisis. Those challenges include capital market regional integration and the harmonization of legal and institutional frameworks such as bankruptcy procedures, accounting and reporting standards, public sector regulatory bodies, corporate governance and a liberalized trade regime.
Allen, F. and Gale, D. 2000. Comparing Financial Systems. Cambridge, Massachusetts: MIT Press.
Arcand, J. L., Berkes, E. and Panizza, U. 2011. Too Much Finance? IMF Working Paper: WP/12/161.
Arellano, M. and Bond, S. 1991. Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 58: 277–297.
Arestis, P. and Demetriades, P. 1997. Financial development and economic growth: assessing the evidence. Economic Journal 107: 783-799.
Atje, R. and Jovanovic, B. 1993. Stock markets and development. European Economic Review 37: 630–640.
Baltagi, B. H. 2008. Econometric Analysis of Panel Data. Chichester: John Wiley & Sons LTD.
Bartlett, W. and Prica, I. 2011. The variable impact of the global economic crisis in South East Europe. London School of Economics Working Paper: Research on South Eastern Europe.
Beck, T., Ross, L. and Norman, L. 2010. Financial intermediation and growth: Causality and causes. Journal of Monetary Economics 46(1): 31–77.
Beck, T., Asli, D. K, and Vojislav, M. 2008. Financing Patterns around the World: Are Small Firms Different? Journal of Financial Economics, forthcoming.
Beck, T., Asli, D. K. and Levine, R. 2005. SMEs, Growth and Poverty: Cross-Country Evidence. Journal of Economic Growth: 197-227.
Beck, T., Berrak, B., Felix, K. R. and Neven, T. V. 2012. Who Gets the Credit? And Does it Matter? Household vs. Firm Lending across Countries. B.E. Journal of Macroeconomics: Contributions 12.
Beck, T., Levine, R. and Loayza, N. 2000. Finance and the sources of growth. Journal of Financial Economics 58: 261-300.
Bencivenga, V. R. and Smith, B. D. 1991. Financial intermediation and endogenous growth. Review of Economic Studies 58(2): 195–209.
Berg, A., Eduardo, B., Ratna, S. and Jeromin, Z. 1999. The Evolution of Output in Transition Economies: Explaining the Differences. International Monetary Fund Working Paper: WP/99/73.
Demirguc-Kunt, A. and Levine, R. 1996. Stock market development and financial intermediaries - stylized facts. The World Bank Economic Review 10(2): 291–321.
Dragutinovic Mitrovic, R. and Ivancev, O. 2010. Driving Forces of Economic Growth in the Second Decade of Transition. Economic Annals 185: 7-32.
Eller, M., Haiss, P. R. and Steiner, K. 2006. Foreign Direct Investment in the Financial Sector and Economic Growth in Central and Eastern Europe: The Crucial Role of the Efficiency Channel. Emerging Markets Review 7(4).
Falcetti, E., Lysenko, T. and Sanfey, P. 2006. Reforms and growth in transition: Re-examining the evidence. Journal of Comparative Economics 34: 421–445.
Falcetti, E., Raiser, M. and Sanfey, P. 2002. Defying the odds: Initial conditions, reforms, and growth in the first decade of transition. Journal of Comparative Economics 30: 229–250.
Fink, G., Haiss, P. R. and Vuksic, G. 2009. Contribution of Financial Market Segments at Different Stages of Development: Transition, Cohesion and Mature Economies Compared. Journal of Financial Stability 5: 431-455.
Fischer, S., Sahay, R. and Carlos, A. V. 1998. From Transition to Market: Evidence and Growth Prospects. International Monetary Fund: Working Paper 52.
Greenwood, J. and Jovanovic, B. 1990. Financial Development, Growth, and the Distribution of Income. The Journal of Political Economy 98 (5): 1076-1107.
Josifidis, K., Allegret, J.P., Gimet, C. and Pucar, E. B. 2014. Macroeconomic policy responses to financial crises in emerging European economies. Econ. Model: 577–591.
Judson, R. and Owen, A. 1999. Estimating dynamic panel data models: a guide for macroeconomists. Economics Letters 65: 9-15.
King, R. G. and Levine, R. 1993. Finance and growth: Schumpeter might be right. Quarterly Journal of Economics 108: 717–738.
Koivu, T. 2002. Do efficient banking sectors accelerate economic growth in transition countries? BOFIT Discussion Papers 14.
Levine, R. 1991. Stock Markets, Growth, and Tax Policy. J. Finance 46(4): 1445–65.
Levine, R. 1997. Financial development and economic growth: Views and agenda. Journal of Economic Literature 35(2): 688–726.
Levine, R. and Zervos, S. 1998. Stock markets, banks, and economic growth. American Economic Review 88: 537–558.
Levine, R., Norman, L., and Beck, T. 2000. Financial Intermediation and Growth: Causality and Causes. Journal of Monetary Economics 46(1): 31-77.
Mankiw, N. G., Romer, D. and David, N.W. 1992. A contribution to the empirics of economic growth. Quarterly Journal of Economics 107: 407-437.
Masten, A. M., Coricelli, F. and Masten, I. 2008. Non-linear growth effects of financial development: Does financial integration matter? Journal of International Money and Finance 27(2): 295-313.
Mehl, A., Vespro, C. and Winkler, A. 2006. Financial Sector Development in South-Eastern Europe: Quality Matters” in Financial Development, Integration and Stability: Evidence from Central, Eastern and South-Eastern Europe, edited by K. Liebscher, J. Christl, P. Mooslechner and D. Ritzberger-Grunwald. Cheltenham, UK: Edward Elgar.
Okičić, J. 2014. Causal Relationship between Trading Volume and Security Returns: A Case of the South Eastern European Region. Regional Economic Development in the Balkan Region. London: Cambridge Scholars Publishing: 132-149.
Sargan, J. D. 1975. Testing for misspecification after estimating using instrumental variables. Mimeo (London School of Economics).
Singh, A. 1997. Financial liberalization stock markets and economic development. The Economic Journal 107: 771–782.
Staehr, K. 2005. Reforms and economic growth in transition economies: Complementarity, sequencing and speed. The European Journal of Comparative Economics 2: 177-202.
Stock, J. H. and Watson, M. W. 2003. Introduction to Econometrics: Pearson.