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Effect of Information and Communications Technology on Stock Market Development: Evidence from Emerging Markets and High-Income Economies

IJED, Vol. 5 No. 1, (2003)

This paper investigates the links between information and communications technology (ICT) and stock market development in a sample comprising of high-income and emerging market economies. The empirical results of the least squares dummy variable model confirms that personal computers and internet hosts as the two ICT variables having strong positive effects on stock market development. The results also revealed strong positive effects of market capitalization and credit to the private sector as non-ICT contributors to stock market development. Controlling for income and technological differences, our results lead us to conclude that emerging market economies have already seized an opportunity to leap frog the high-income countries that is, by going straight from underdeveloped networks to fully digitized networks, bypassing the traditional analog technology. As such this leap frogging is positively enhancing their stock markets. Some policy implications are drawn.

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