THE CAPITAL MARKET AS A DRIVER OF ECONOMIC GROWTHWITH AN EMPHASIS ON INSTITUTIONAL INVESTORS INVESTMENTS

Abstract

The relationship between economic development and economic growth has been deeply analyzed, but the interrelationship between capital markets and economic growth has not been
researched enough. The lack of research in this field was the driving factor for the analysis in this  paper. Existing literature shows that capital market promotes the economic activities and are very beneficial for the investors, especially the institutional investors. Therefore, as dependent variable in this paper was taken the GDP growth, while the independent is the market
capitalization. Results show that market capitalization is significant and has positive effect on the economic growth in the European Union. Additionally, the data was obtained from the World Bank database and the period of analysis is from 2006-2020. Considering the positive effect, this creates opportunities for further and deeper research. Nevertheless, institutional investors have shown their positive effect on economic growth, thus, more developed capital markets can be more attractive for them. The more institutional investors invest in the capital markets, the better will be the economic growth of the countries in the European Union.