Report on Relationship Between Economic Growth and Stock Market in Bangladesh free essay sample

This paper analyzed the connection between financial exchange advancement and monetary development of two Asian creating nations, that is, Pakistan and Bangladesh, after the progression time of 1990s. The relationship estimated were as far as size (showcase capitalization), liquidity (complete estimation of stocks exchanged and stock turnover proportion) and volume (all out number of organizations recorded in the stock trade of every one of the nation). The investigation of similar examination was finished with the assistance of tables and outlines. The econometric aftereffects of the examination by utilizing the relapse investigation indicated that Pakistan financial exchanges add to the monetary development as far as the enormous size of its securities exchange though Bangladesh securities exchange adds to the monetary development as far as the liquidity of its financial exchange. Bangladesh monetary development was seen as similarly superior to financial development of Pakistan. The investigation uncovered that the securities exchanges in Pakistan and Bangladesh don't assume a significant job in the monetary development but instead, these money related foundations are the main impetuses for the financial development of the nation. Securities exchanges assume a urgent job in worldwide financial matters and corporate account where the budgetary markets create money for the monetary development of the nation. Bangladesh has two stock trade, that is, Dhaka Stock Exchange (DSE) Chittagong stock exchange(CSE). Stock trade of a nation is the budgetary establishment that manages money related instruments. It was essential to answer the expanding number of the basic inquiries with respect to financial exchange execution and monetary development, for example, do the stock trades of the nations influence on the monetary development of a nation, in the event that indeed, at that point how? This examination features certain components that can be utilized to quantify the securities exchange improvement and its impact on the country’s financial development. Other than this, it was essential to contemplate. This investigation examinations the impact of Pakistan and Bangladesh financial exchange improvement on their respec-tive GDP per capita by thinking about three of the securities exchange pointers, that is, advertise capitalization, complete estimation of stocks exchanged, stock turnover proportion and in conclusion all out number of recorded organizations. Goals ii. To look at the impact of securities exchanges advancement on the financial development of Bangladesh. I. To think about the financial exchanges advancement and monetary development of the earlier year. Various examinations gave both negative and positive confirmations of the securities exchange advancement and the financial development. Mishkin (2001) expressed that a settled, oversaw and composed securities exchange gets speculation openings the nation by actualizing the beneficial undertakings that at last outcomes in the financial action, assembling reserve funds, enhancing dangers and allotting successful capital. Liquidity estimation was characterized as the measure to check the capacity of the financial exchange to manage the enormous number of stocks exchanged, regardless of any extraordinary changes in value levels. Nowbutsing and Odit (2008) characterized absolute stock worth exchanged as the firm’s value exchanged a sorted out way with the goal that it would brings about the national yield. As indicated by Kyle (1984) and Holmstrom et al. (1998), the more financial exchange is fluid the more it will be productive in conveying the precise and auspicious data to within and outside speculators. As indicated by Levine (1991), created and composed securities exchange decreases the efficiency and liquidity of the organizations. Amaral and Quintin (2007) contended that the securities exchange advancement upgrade the financial development by making capital gainful, and guaranteeing its best use. As indicated by Aysan (2006), high capital level of lacking budgetary area expands the development unpredictability of a nation. The securities exchange improvement is the most huge factor that prompts the monetary development (Shahbaz et al. , 2008). The endogenous financial hypothesis expresses that improved strategy measures with advancement, rivalry, changes, transparency and innovative work will prompt the since quite a while ago run monetary development of the nation. Hypothesis distinguishes the two main considerations of financial development, that is, human capital and innovation. Specialization, preparing and experience expands the efficiency of the nation while, cutting edge innovation and development mirror the basic changes in the framework. As indicated by Hansson et al. (1997), human capital and innovation may rely upon the capacity and structure of the money related establishments. Prior, the securities exchanges of both Pakistan and Bangladesh were physically worked however at present they are electronically based and furnished with particular human power that would bring about the viable execution and included national yield of the division. Speculations H1: Stock markets advancement has critical impact on the financial development of Pakistan. H0: Stock markets advancement has no critical impact on the monetary development of Pakistan H2: Stock markets improvement has noteworthy impact on the financial development of Bangladesh. H0: Stock markets advancement has no huge impact on the financial development of Bangladesh The examples had been haphazardly chosen and pointers for getting to the connection between financial exchange and monetary development included one ward variable, that is, GDP per capita development in US$ (in millions) and four free factor, that is, showcase capitalization in US$ (in millions) as a proportion of securities exchange size, complete estimation of stock exchanged (in level of GDP) and stock turnover proportion (in rate) as a proportion of liquidity of the financial exchange and volume of the financial exchange decided through the all out number of recorded organizations. Log change with the stepwise strategy was applied on the free factors of Pakistan and Bangladesh. Gross domestic product per capita is estimated as GDP partitioned by the complete populace of the nation. Gross domestic product quantifies the way of life of the individuals in the nation. Market capitalization is the worth and size of the enterprise or business, increasingly profitable capital in a nation results into progressively monetary development will be come about. It is estimated by duplicating the remarkable portions of the organization by their offer cost. All out estimation of stock exchanged alluded to the all out number of offers that is exchanged the market, times their individual costs, and stock turnover proportion is determined by separating the all out estimation of stock exchanged by showcase capitalization. In conclusion, the volume of the securities exchange was inspected by the all out number of all the recorded organizations in Pakistan and Bangladesh over the time of 1990 to 2009. To gather the information, the enhancement source utilized is World Bank Indicators. This investigation looks at with a presumption, that is, the example chose for the examination is really illustrative of the populace. This examination could be increasingly refined if the quarterly information is utilized with the goal that accurate investigation should be possible. Bangladesh financial development examination The outcomes in Table 2 demonstrates that as complete stock worth exchanged increments by 1%, the assessed increment in the mean or normal GDP per capita is about 114% focuses, and if the estimation of the all out stock worth exchanged Bangladesh was fixed at zero, the mean GDP per capita of Bangladesh would be about 342% focuses, that is, GDP per capita of the nation would be extremely high. The outcomes shows that the Bangladesh securities exchange is little in size and is extremely fluid and manages a genuinely enormous number of stocks exchanged with no radical costs influence. Besides, all out stock worth exchanged and genuine GDP per capita of Bangladesh have a positive connection in the middle of them. It has been assessed that various nations as for their financial development were impacted by various segment exhibitions because of the distinction in the economies of their nation. Financial development of Pakistanhas been impacted by advertise capitalization and Bangladesh by all out stock worth exchanged.