A Review - Stock Market Development and Nexus of Market Liquidity : The Case of Fiji

The purpose of this paper is to explore the macroeconomic and institutional factors influencing stock market development (SMD) in Fiji and to explore the causes of the prolonged sluggish nature of the South Pacific Stock Exchange (SPX) in Fiji. The findings that economic growth promotes SMD while inflation is negatively correlated to SMD were consistent with previous findings. However, the finding that regulatory quality and banking sector development have negative impacts on SMD was contrary to the findings of previous studies. Many determinants did not show any significant impact on the South Pacific Stock Exchange (SPX) in the Fijian context, particularly the stock market liquidity showed no correlation to SMD. Exploration of the nexus of the market liquidity reveals that present regulatory conditions are not conducive for the stock market to be vibrant, and suggests eliminating excessive paperwork and entry restrictions are critical, not only to attract new players to the market but also to increase trading volumes. We argue that the concentration of ownership and market disintegration resulted in the current sluggish status of the SPX