The Impact of Stock Markets on Economic Growth Essay

The Impact of Stock Markets on Economic Growth - Essay Example This paper describes the mechanism of the of the impact of stock market on long-term economic indicators, regarding the growth of the economy. Main channels of stock markets influence on economic growth of a country are specified. It is known that stock markets are connected with the economic growth through the creation of liquidity. It means that really profitable investments demand just long-turn capital commitment, but investors don’t want to relinquish their capital for such long time without any control. Actually liquid stock markets make their investments more secure and in such way more attractive. Stock markets allow investors to acquire equity (an asset) and then to sell it rather quickly and without any problems. Liquid stock markets facilitate long-term investments and make them more profitable. It is apparent that stock markets are necessary and important for growth, because they improve capital allocation and in such a way they enhance prospects for long-term economic development. Stock markets as it was mentioned above make investments more secure and attractive. Actually well-functioning stock market is useful and necessary for economic development through following issues: growth of investments and savings, effective and efficient resources allocation, better distribution and utilization of existing resources. Volatility of stock markets had negative influence in France and Japan. Stock market volatility didn’t affect greatly the United Kingdom. Concerning Germany the volatility was stated to be insignificant.