IMPACT OF STOCK MARKETS ON THE ECONOMY IN THE V4 COUNTRIES
The performance of the economy should generally reflect the performance of stock markets. Production increases, prices rise, and companies’ profits increase if the economy grows. And the shares should naturally make the profits (which means among other things, higher dividends) even more attractive. But is that really true? The aim of the article is to find out the relationship between the development of stock markets and the economic growth in Visegrad Group countries (V4). The subject of the survey is both the long-term relationship and the short-term relationship in the course of economic cycles. The article uses the tools of time series econometrics, especially VECMs, including corresponding diagnostics, Granger causality and block erogeneity. The relationships between the variables examined vary from country to country. The long-term relationship between the development of stock markets and the economic growth was confirmed in Slovakia and Hungary. It was confirmed that the GDP growth rate influenced the growth rate of stock indices in all V4 countries. The opposite relationship (the stock index growth rate influences the GDP growth rate) was not confirmed only in the Czech Republic. Quarterly data for the period from 2005/Q1 to 2018/Q4 was used for the analysis. This period was selected because all of the V4 countries have been members of the European Union since 2004. The EViews software version 9 was used for the calculations. Variables used in this research are: the GDP, the stock Exchange index of the country and stock trading volume. The PX, SAX, BUX and WIG20 stock indices are considered to be the crucial representatives of individual stock markets in this work.
Jméno a příjmení autora:
ADF test of stationarity, Granger causality, impulse-response analysis, stock market, VECM, V4
DOI (& full text):
The objectives and common interests of the V4 countries were described in the Visegrad Declaration (1991). One of the objectives was to create favorable conditions for direct cooperation between…více
The objectives and common interests of the V4 countries were described in the Visegrad Declaration (1991). One of the objectives was to create favorable conditions for direct cooperation between enterprises, for foreign capital investment, for the development of financial and stock markets. And this is the reason why the countries of V4 were selected for the analysis. The paper could confirm the relationship between the development of stock markets and the economic growth in the V4. Following the admission of the V4 countries to the European Union in 2004, Visegrad Four’s foreign-policy activities increased significantly and the group focused on promoting cooperation and stability in the wider Central European region. The article dealt with the effects of the stock market on the economy in individual countries and discusses the relationship between the GDP, the stock trading volume and the index rate. The goal of this paper is to find if exists the long-term relationship and the shortterm relationship between variables. Why is the mutual dependence of the GDP and income from shares different in the V4 countries?