Economic Strategy

Economic Strategy

Foundations of Capital Market Development: Evidence from Emerging Economies for Policymaking in Iran (with emphasis on the seventh development plan)

Document Type : Original Article

Authors
Mahdi Mahmud Robati 1
Keyhan Barzegar 2
Ali Ashraf Nazari 3
1 Ph.D. student in Public Policy, Islamic Azad University, Science and Research Branch, Islamic Azad University, Tehran, Iran.
2 Corresponding Author, Associate Professor, Faculty of Law, Theology and Political Sciences, Science and Research Branch, Islamic Azad University, Tehran, Iran.
3 Associate Professor, Faculty of Law and Political Sciences, University of Tehran, Tehran, Iran
10.22034/es.2024.463927.1777
Abstract
A well-developed and efficient capital market can play a significant role in confronting economic, political, and social challenges. Therefore, identifying fundamental factors in the development of the capital market is a crucial and necessary topic. In this study, the foundations of capital market development are examined and compared in selected countries with emerging markets using six indicators: inflation, fiscal policy, the banking system, financial openness, ease of doing business, and the rule of law, utilizing the pooled mean group method (PMG) for selected emerging markets, and the autoregressive moving average method (ARMA) for Iran from the years 2000 to 2021. The results show that inflation and fiscal policy, which create a stable environment for capital market growth, have led to instability in Iran and Turkey, while providing stability in Singapore, Malaysia, and India. Additionally, the results from the dynamic panel data model confirm the positive impact of macroeconomic stability on the growth of the capital market in selected emerging economies. In the area of financial sector development, particularly in terms of the banking system and bank credit to the private sector relative to GDP, there has been a positive and significant impact on capital market development in selected emerging economies, especially in Singapore, Malaysia, and India. However, contradictory results have been observed regarding financial openness. In institutional indicators, Singapore, Malaysia, Turkey, and India possess a strong legal and institutional environment.
Keywords
Capital Market Development
Macroeconomic Stability
Financial Sector Development
Strong Institutional Environment
Dynamic Panel Data
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  • Receive Date 25 June 2024
  • Revise Date 07 November 2024
  • Accept Date 12 November 2024