Interrelationships among banks, stock markets and economic growth: An empirical investigation

Dong Hyeon Kim, Shu Chin Lin

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)


This article utilizes a simultaneous equations model to study the relationships among economic growth, banking and stock market development. In contrast to conventional instrumental variable approach, we implement the analysis via the methodology of identification through heteroscedasticity. Using Beck and Levine (2004) dataset, we find that each of the three variables interacts in important ways. While both are conducive to economic growth, banking development matters more for growth in low-income countries and stock market development is more favourable to growth in high-income or low-inflation ones. The data also reveal coexistence of a positive effect of banking development on stock market development and a negative effect of stock market development on banking development. Besides, the feedback effects of growth on both banking and stock market development are found.

Original languageEnglish
Pages (from-to)4385-4394
Number of pages10
JournalApplied Economics
Issue number31
Publication statusPublished - 2013


  • Economic growth
  • Financial development
  • Identification through heteroscedasticity

ASJC Scopus subject areas

  • Economics and Econometrics


Dive into the research topics of 'Interrelationships among banks, stock markets and economic growth: An empirical investigation'. Together they form a unique fingerprint.

Cite this