The World Federation of Exchanges (WFE) has published research on the global relationship between stock market development and economic growth, focusing on how changes in stock market capitalisation relate to changes in economic output across different income groups. Using quarterly data from 37 countries over 2003–2022, the study finds that in the short term high-income countries show a two-way relationship between output growth and stock market capitalisation, while low and middle-income countries show a one-way relationship where capitalisation increases are linked to higher growth but economic growth does not feed back into higher market capitalisation. The short-term growth response to market capitalisation is stronger in low and middle-income countries, with a doubling of market capitalisation associated with an increase of over 0.4% in economic growth within two quarters. Over the long term, stock market capitalisation is associated with higher economic growth across all income groups, with a stronger effect in high-income economies where a 10% increase in capitalisation is associated with a 0.045% rise in long-term growth. The WFE positions the findings as supporting tailored policy approaches, including measures to stimulate market capitalisation in low and middle-income countries and actions to support stock markets in high-income jurisdictions where they are struggling.
World Federation of Exchanges 2025-01-06
World Federation of Exchanges research finds stock market capitalisation growth boosts output, with a doubling lifting low and middle-income growth by over 0.4%
The World Federation of Exchanges' research shows high-income countries have a two-way relationship between output growth and stock market capitalisation, while low and middle-income countries have a one-way relationship where capitalisation boosts growth. The study suggests tailored policies to stimulate market capitalisation in low and middle-income countries and support stock markets in high-income regions.