Andriansyah, Andriansyah and Messinis, George (2013) Equity markets and economic development: does the primary market matter? In: The 42nd Australian Conference of Economists : Conference Proceedings : Beyond the Frontiers: New Directions in Economics, Held at Murdoch University, Perth, Western Australia, on 7-10 July, 2013. Butler, David and Mangano, Maria, eds. Murdoch University, Perth, Western Australia.

Abstract

This paper examines the role played by primary and secondary equity markets in economic growth. In contrast to standard literature considering secondary market indicators, this study integrates both types of market while explicitly acknowledging the role of primary markets. By employing a variety of dynamic panel estimators for 54 countries over the period 1995-2010, we show that the primary equity market is not an important determinant of economic growth, despite facilitating development of the secondary market. This study also confirms the importance of secondary market activity, such as trading liquidity,as a determinant of economic growth. These results call for a further investigation into the capital-raising function of equity markets in relation to their liquidity function. --ACE 2013

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