Keywords:
Financial markets
risk
growth
economies of 21st century

  • Abstract

    This study provides a comprehensive analysis of the financial markets in the 21'st century; focusing on the G7 countries: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. The justification for this research originates from the significant role these markets plays in the global economy and the need to understand their complexities in relation to risk, uncertainty, and economic growth. The primary objective is to empiricaly investigate the dynamics and correlations of these aspects within the financial markets of the countries selected in this study. The study is based on secondary data spanning 12 years, from 2010 to 2021, covering all 7 countries, and making it a panel data analysis. Methodologically, the research employs various econometric models and techniques, including Ordinary Least Squares, OLS Robust, and fixed and random effects models. The empirical results suggest that the fixed effects model is the most suitable for this study, as confirmed by the Hausman test. According to this model, a 1% increase in stock market capitalization relative to GDP positively impacts GDP growth by 0.06. Furthermore, stock market value trades were found to have a positive correlation with economic growth. In contrast, stock price volatility and pension fund assets negatively impact economic growth. Notably, these findings diverge from some previous studies in the field. In conclusion, the research provides valuable insights into the relationship between financial markets and economic indicators in the G7 countries, thereby offering policy-makers a more nuanced understanding of how to foster economic growth while mitigating risks.

  • References

    1. Al-Awadh, AM, Alsaifi K, Al-Awadhi A, Alhammadi, S (2020) Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 27. DOI: https://doi.org/10.1016/j.jbef.2020.100326
    2. Abdul-Khaliq, S (2013) The impact of stock market liquidity on economic growth in Jordan. European Journal of Business and Management, 5(30), 154-158.
    3. Baker SR, Bloom, N, Davis, SJ, Kost K., Sammo M, Viratyosin T (2020) The unprecedented stock market reaction to COVID-19. In Review of Asset Pricing Studies (Vol. 10, Issue 4). DOI: https://doi.org/10.1093/rapstu/raaa008
    4. Bhowmik D (2013) Stock market volatility: An evaluation. International Journal of Scientific and Research Publications, 3(10), 1-17.
    5. Chen Y, Ma Y, Tang K (2011) The chinese financial system at the Dawn of the 21st century: An Overview. The IEB International Journal of Finance, 2.
    6. Clark, GL (2003) Pension security in the global economy: Markets and national institutions in the 21st century. Environment and Planning A, 35(8). DOI: https://doi.org/10.1068/a35251
    7. Davis P, Hu YW (2005) Is there a Link between Pension-Fund Assets and Economic Growth? -A Cross-Country Study. CCISSR Forum 2004, June.
    8. Hausman, JA (2015) Specification tests in econometrics. Applied Econometrics, 38(2). https://doi.org/10.2307/1913827
    9. Huy DTN, Dat, PM, Anh, P (2020) Building an econometric model of selected factors’ impact on stock price: A case study. Journal of Security and Sustainability Issues, 9(May). DOI: https://doi.org/10.9770/JSSI.2020.9.M(7)
    10. Idenyi O, Ifeyinwa, A, Samuel, O., Chibuzor, C (2017) Capital Market Indicators and Economic Growth in Nigeria; An Autoregrssive Distributed Lag (ARDL) Model. Asian Journal of Economics, Business and Accounting, 2(3). DOI: https://doi.org/10.9734/ajeba/2017/32549
    11. Karmaker CL, Al Aziz R, Palit T, Bari, AM (2023) Analyzing supply chain risk factors in the small and medium enterprises under fuzzy environment: Implications towards sustainability for emerging economies. Sustainable Technology and Entrepreneurship, 2(1), 100032. DOI: https://doi.org/10.1016/j.stae.2022.100032
    12. Kolte A, Kumar Roy J, Tulsiram Patil D, Pawar A, Sharma P (2021) Global Financial Crisis in 21stCentury: A Brief Analysis of Stock Exchanges. Proceedings of 2nd IEEE International Conference on Computational Intelligence and Knowledge Economy, ICCIKE 2021. DOI: https://doi.org/10.1109/ICCIKE51210.2021.9410680
    13. Kuvshinov D, Zimmermann K (2022) The big bang: Stock market capitalization in the long run. Journal of Financial Economics, 145(2), 527-552. DOI: https://doi.org/10.1016/j.jfineco.2021.09.008
    14. Lee CC, Chiu Y Bin (2013) The link between life insurance activities and economic growth: Some new evidence. Journal of International Money and Finance, 32(1). https://doi.org/10.1016/j.jimonfin.2012.05.001
    15. Libich J, & Lenten L (2022) Hero or villain? The financial system in the 21st century. Journal of Economic Surveys, 36(1). DOI: https://doi.org/10.1111/joes.12437
    16. Mazur M, Dang M, Vega, M (2021) COVID-19 and the march 2020 stock market crash. Evidence from S&P1500. Finance Research Letters, 38. DOI: https://doi.org/10.1016/j.frl.2020.101690
    17. Nti IK, Adekoya AF, Weyori, BA (2020) A systematic review of fundamental and technical analysis of stock market predictions. Artificial Intelligence Review, 53(4). DOI: https://doi.org/10.1007/s10462-019-09754-z
    18. Nwanne TFI (2015) Impact of contributory pension scheme on economic growth in Nigeria. Global Advanced Research Journal of Management and Business Studies, 4(8), 333-337. DOI: http://garj.org/garjmbs/index.htm
    19. Omodero CO (2020) Capital market determinants and market capitalization in Nigeria. International Journal of Financial Research, 11(1). DOI: https://doi.org/10.5430/ijfr.v11n1p462
    20. Prats MA, Sandoval, B (2020) Does stock market capitalization cause GDP? A causality study for central and eastern European countries. Economics, 14. DOI: https://doi.org/10.5018/economics-ejournal.ja.2020-17
    21. Zaremba A, Aharon DY, Demir E, Kizys R, Zawadka D (2021) COVID-19, government policy responses, and stock market liquidity around the world: A note. Research in International Business and Finance, 56. DOI: https://doi.org/10.1016/j.ribaf.2020.101359
    22. Zhang N, Wang A, Haq NU, Nosheen S (2021) The impact of COVID-19 shocks on the volatility of stock markets in technologically advanced countries. Economic Research-Ekonomska Istrazivanja. DOI: https://doi.org/10.1080/1331677X.2021.1936112
Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Copyright (c) 2024 Malque Publishing

How to cite

Gara, A., Qehaja-Keka, V., Hoti, A., & Qehaja, D. (2023). The evolving financial landscape: analyzing uncertainty, risks, and growth in G7 economies of the 21st century. Multidisciplinary Science Journal, 6(5), 2024077. https://doi.org/10.31893/multiscience.2024077
Crossref
Scopus
Google Scholar
Europe PMC
  • Article viewed - 580
  • PDF downloaded - 329