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Research Article

Determinants of economic growth in Hong Kong: The role of stock market development

ORCID Icon | (Reviewing editor)
Article: 1510718 | Received 05 Mar 2018, Accepted 08 Aug 2018, Published online: 30 Aug 2018
 

Abstract

We assessed the impact of stock market development on growth in Hong Kong for the period 1986Q2 to 2015Q4. By constructing a composite index of stock market development and controlling for the key determinants of growth, we found stock market development to promote growth both in the short and long run. We further constructed an alternative index of stock market development and found this conclusion to be robust. Our findings are broadly consistent with the growth experience of Hong Kong. Policies meant to promote stock market development may enhance growth in Hong Kong as well.

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PUBLIC INTEREST STATEMENT

The stock market in Hong Kong has developed rapidly alongside the pace of economic growth during the past decades. Could it be that the stock market was the key driver of this economic expansion? In this paper, we attempted to answer this question by assessing the impact of stock market development on economic growth for the period 1986Q2–2015Q4. By constructing a composite index of stock market development and controlling for the key determinants of growth, we found stock market development to promote growth both in the short and long run. We constructed an alternative index of stock market development and found this conclusion to hold. Based on our findings, we believe that the policymakers in the country should continue to pursue policies that promote stock market development in order to sustain economic growth.

Notes

1. See also Karimo and Ogbonna (Citation2017).

Additional information

Funding

The author received no direct funding for this research.

Notes on contributors

Sin-Yu Ho

Sin-Yu Ho is a senior lecturer at the Department of Economics of the University of South Africa where she focuses on topics relating to development finance, stock markets, emerging markets and developing countries.