STOCK MARKET DEVELOPMENT AND ECONOMIC GROWTH: A META-ANALYSIS

Abstract

Stock markets have become central to debates on long-run development because they can mobilize savings, improve liquidity, diversify risk, and discipline corporate investment, yet empirical findings on their macroeconomic contribution remain fragmented across countries, indicators, and estimation techniques. This study investigates whether stock market development systematically promotes economic growth and whether that relationship depends on the indicator used and on institutional conditions. The paper employs a secondary research design and meta-analytic direction-of-effect synthesis based on 30 peer-reviewed empirical studies published between 1998 and 2025. Each study is coded by region, period, methodology, stock market proxy, growth measure, institutional conditioning, and overall result direction, and the evidence is summarized with supportive shares, a sign test, and a weighted evidence index. The results show that 17 studies report a clearly positive relationship, 6 report a conditional positive relationship, 6 find mixed or insignificant results, and only 1 reports a net negative result. This yields a supportive share of 76.7% across all included studies and 95.8% among the 24 studies with an identifiable net direction, with the directional sign test rejecting symmetry (p < 0.001). The weighted evidence index equals 0.625, indicating moderately strong overall support. Indicator-level coding shows that liquidity-based proxies are more consistently favorable than size-based proxies, while recent threshold and interaction studies reveal that institutional quality shapes the nexus. Overall, the meta-analysis finds that stock market development is usually growth-enhancing, but the effect is heterogeneous rather than automatic, becoming strongest when markets are liquid, regulated, and embedded in supportive institutional environments.