The Relationship Between Stock Market Development And Economic Growth In Emerging Market Economy: Indonesia, Malaysia, And The Philippines


  • Silvia Rini Putri
  • Ana Noveria


Abstract. This study examined whether the economic growth of Emerging Market Economy (EME) in selected Association of Southeast Asian Nations (ASEAN) are influenced by stock market activity. The ASEAN Economic Community portray ASEAN as a group of economies with equal economic development. In fact, there are different economic level within ASEAN. The question arises about why only 4 out of 10 countries are categorized as EME in ASEAN. ASEAN’s goal is to build a stable, prosperous, and highly competitive economic region. It is expected to be beneficial to understand that as one of possible economic growth factor, stock market can improve the economic growth of ASEAN EMEs. Through Johansen cointegration test, Vector Error Correction Model, and Granger Causality test, it shows that the economic growth is forecasted by stock market activity. In regard to these findings, this factor can be used to boost the economic growth of ASEAN EMEs by developing an economic integration program or macroeconomic policy associated with stock market development such as enhancing the market capitalization or investor confidence through better policy formulation or raising the awareness to gain the total transaction value, and enhancing the liquidity by liberalizing international capital flow restrictions that can accelerate economic growth.

Keywords: stock market development; economic growth; emerging market economy; ASEAN