Abstract:
The purpose of the study is to investigate the impact of stock market performance on
economic growth in Sri Lanka. Share market plays a critical role in facilitating
countries’ economic growth and prosperity. Economic growth is an increase in the
capacity of an economy to produce goods and services, compared from one period of
time to another. Dependent variable of this study is economic growth which is
measured by Gross Domestic Product (GDP) and independent variable is stock market
performance measured by All Share Price Index (ASPI). Further Inflation Rate (INF)
and Exchange Rate (ER) have considered as control variables in this study. The study
targets all the companies listed and active at the CSE from 2002 to 2016. For data
analysis, secondary data was collected from annual reports of Central bank of Sri
Lanka, Colombo Stock Exchange (CSE), Securities and Exchange Commission and
Department of Census and Statistics. Based on the multiple regression analysis findings
reveal that Stock market performance significantly impacts on economic growth
whereas Inflation rate and exchange rate have no significant influence on economic
growth. These findings hold practical implications for policy makers, stock market
regulators, investors and stock market analysts. The findings of the study have some
valuable implications. It could give some insight for policy makers about the possible
linkages between stock market performance and the economic growth.
