Title: Stock market, economic growth and EU accession: evidence from three CEECs

Authors: Guglielmo Maria Caporale; Nicola Spagnolo

Addresses: Centre for Empirical Finance, Brunel University, West London, UB8 3PH, UK ' Centre for Empirical Finance, Brunel University, West London, UB8 3PH, UK

Abstract: This paper estimates a bivariate VAR-GARCH (1,1) model to examine linkages between the stock market and economic growth in three CEEC countries (the Czech Republic, Hungary and Poland). The empirical findings suggest that there is unidirectional causality running from stock markets to growth in the levels; this linkage becoming stronger following EU accession, which appears to have been beneficial, presumably as a catalyst for institutional building and development. The same holds in most cases for volatility spillovers as well. In addition, Germany is confirmed to act as a locomotive for these countries, and a tight monetary policy is found to affect both economic and stock market growth adversely.

Keywords: CEEC countries; Central and Eastern Europe; GARCH model; volatility spillovers; stock markets; economic growth; EU accession; European Union; Czech Republic; Hungary; Poland; Germany; modelling; monetary policy.

DOI: 10.1504/IJMEF.2012.048736

International Journal of Monetary Economics and Finance, 2012 Vol.5 No.2, pp.183 - 191

Published online: 28 Aug 2012 *

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