Equity Markets and Economic Development : Does the Primary Market Matter?

This paper examines the role played by primary and secondary equity markets in economic growth by integrating both types of market. By employing a variety of dynamic panel estimators for 54 countries over the period 1995-2010, we show that the primary equity market is not an important determinant of economic growth, despite facilitating development of the secondary market. This study also confirms the importance of secondary market activity, such as trading liquidity,asa determinant of economic growth. These results call for a further investigation into the capital-raising function of equity markets in relation to their liquidity function