Assignment Sample on Stock Market in Modern Economy
Introduction
Stock market plays a significant role in managing financial performance of the country. It has been often identified to have ability to boost the economic growth of the country. Several researchers however argue that stock market does not play a key role in boosting the financial segment. Systems have encouraged technological innovations and hence promoted economic growth of the country. This debate is endless and revolves around stick price movement and performance of stock market in the economic growth of the country. The essay below studies role of the stock market in modern economy and explore if it leads to positive or negative impact on the global economy.
Main body:
The relationship between the financial development as well as economic growth has been studied extensively. Aliyev (2020), discussed the importance of financial sector development in promoting economic growth. His studies pointed out that a properly functional financial system help in advancing the overall financial environment of the country through involvement of funds from the investors in a strategic way.
This connection between the financial sector and the stock market has been extensively studied by Brennan and Barnes-Murphy (2013), in this research work relationship between financial development and growth has been explored under the ‘demand following’ and ‘supply leading’ approach. Stock markets are originally financial institutions that were helped with the thought of helping business as well as entrepreneurs to buy or sell products and boost trade. Stock market system has helped in the emergence of unique financial terms and concepts such as IPOs an acronym for new business stock introductions. The stock markets are arguably one of the best channels that evaluates the company worth by evaluation of the organizational assets. The assessment of firms resources through the capital exchange offers the standards that could be used for other corporations and shareholders, thus increases the depth and competence of company assets in a structured way (Zavoloka, Linnik and Kolesnik, 2018).
Recent researchers and economists along with the policy makers have conducted an empirical study on the factors that leads to the economic development in the global economic growth since the world stock markets have shown positive growth. Paramati and Gupta (2013), in their research work conducted panel data analysis to understand the economic expansion under the influence of stock market. Research also underpinned that stock market plays a significant role in the improvement of the financial condition of the Middle Income countries. The stock exchange capitalization, and its liquidity play a significant role in the economic progress of Lower or Middle income country. Key changes in the economic environment of the country is reflected in the share prices. The price rise or fall in the share value highlights at the boom or recession of the economy (Zaritskiy, 2019). Stock exchange is therefore known as the pulse of the economic condition of the state. The stock market also assist in evaluating the value of the securities and monitor the demand and supply factors. The securities of the growth oriented companies are generally high.
It has been also argued by several researchers that a developed stock market has the potential to boost savings and support investment capital at a low expense by offering financial instruments. In order to carry out this responsibility efficient allocation of resources is important and this eventually promotes the economic growth of the country. The market successfully allocates capital resources and lead to the investment that would slowly lead to the economic growth. For instance the causal nexus between stock market development and economic growth that was studied by thinker Aliyev (2020), for France for the period of 1965 to 2007. This research work focused on the implementation of co-integration, Granger causality test as well as the Vector error correction model that found out that future experiences positive growth with the support from the stock market development however during this phase the economic development and the rate of interest experienced some negative impact.
From the study it is evident that the stock market growth leads to the development of operational policies that encourages effective channelization of the economic growth. Researchers also pointed out that in order to explore the exact influence of stock market on the economic development it is important to focus on the economic development of the Lower Middle class Income, unfortunately lack of availability of primary data has limited the evaluation of the situation (Paramati and Gupta, 2013).
Conclusion:
It may be inferred from the study on the topic of role of stock market in the financial growth that stock market plays a key role in monitoring values and this return leads the positive or negative growth of the respective economy. However, Middle Class income is largely influenced by the value determination and this impact on the overall growth of the economic condition. Several business models and investments are planned as per the value analysis of the stock market. Thus, it play a significant role in the market development.
References
Aliyev, T., 2020. Impact Of Stock Market Development On Economic Growth: Empirical Evidence. Globus, (4(50).
Brennan, L. and Barnes-Murphy, R., 2013. The stock market. Mankato, MN: The Child’s World.
Chodorow-Reich, G., Nenov, P. and Simsek, A., 2019. Stock Market Wealth and the Real Economy: A Local Labor Market Approach. SSRN Electronic Journal,.
Fang, S., Lu, X. and Egan, P., 2018. Reinvestigating the Oil Price-Stock Market Nexus: Evidence from Chinese Industry Stock Returns. China & World Economy, 26(3), pp.43-62.
North, C. and Caes, C., 2012. The stock market. New York, NY: Rosen Pub.
Paramati, S. and Gupta, R., 2013. An Empirical Analysis of Stock Market Performance and Economic Growth: Evidence from India. SSRN Electronic Journal,.
Zavoloka, L., Linnik, A. and Kolesnik, D., 2018. Stock Market: Modern State And Development Prospects. Economy and Society, (18).
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