An Empirical Study of the Relationship Between Economic Growth and Stock Market Capitalization in Asia

Posted: Sep 12, 2022

• Noah Young
• Olivia Gonzalez
• Olivia Thompson

Abstract

The relationship between economic growth and financial market development has been a subject of extensive scholarly inquiry, particularly in the context of emerging economies. Traditional economic theory posits a bidirectional relationship where economic growth stimulates financial market development through increased savings and investment opportunities, while simultaneously, developed financial markets facilitate economic growth through efficient capital allocation and risk diversification. However, the Asian economic landscape presents unique characteristics that challenge these conventional paradigms. The region has experienced unprecedented growth trajectories, diverse institutional frameworks, and varying degrees of market liberalization, creating a complex tapestry of economic interactions that cannot be adequately captured by linear models. This research introduces a groundbreaking methodological approach that transcends traditional econometric analysis by incorporating principles from quantum computation and information theory. The motivation for this novel framework stems from the observed limitations of classical economic models in explaining the non-linear, context-dependent relationships that characterize Asian financial markets. Our study addresses several critical gaps in the existing literature. First, we challenge the assumption of linear causality that underpins most empirical studies in this domain. Second, we develop a computational framework that can accommodate the multi-dimensional nature of economic interactions, where multiple variables simultaneously influence market outcomes. Third, we provide a theoretical foundation for understanding why certain Asian economies exhibit stronger growth-market capitalization relationships than others, despite similar macroeconomic conditions.