Capital Market Development as a Driver of Economic Growth: The Case of Mongolia
https://doi.org/10.47703/2789-8253-2026-1-36-55
Abstract
The development of capital markets in emerging economies is considered a key factor in ensuring sustainable economic growth and enhancing financial stability. Given Mongolia’s high dependence on commodity exports and external shocks, the study of the stock market’s role in economic growth dynamics is increasingly relevant. The objective of this study is to empirically test the role of Mongolia’s capital market in economic growth. The methodological basis of the study comprises stationarity tests (ADF, KPSS), the ARDL model with the bounds-testing procedure for detecting cointegration, the vector error-correction model (VECM) for causality analysis, and the FMOLS and DOLS methods for testing the stability of long-run coefficients. The empirical base comprises quarterly data for 2000-2024, sourced from the National Statistical Office of Mongolia, the Central Bank of Mongolia, and the Mongolian Stock Exchange. The results of the ARDL model confirm the existence of a long-term cointegration relationship between GDP and capital market indicators (F-statistic = 4.538, which exceeds the upper critical limit of 3.99 at the significance level of 1%). In the long term, market capitalisation has a statistically significant positive impact on economic growth (coefficient 0.956; p <0.01), while the TOP-20 index shows a negative relationship. The results from FMOLS and DOLS confirm the stability of the estimates. The findings indicate the structural importance of capital market development for Mongolia’s long-term economic growth, however, the identified market concentration and limited liquidity may constrain its potential contribution to the economy.
About the Author
Ankhbileg Khurelbaatar
National University of Mongolia, Business School
Mongolia
Mongolia
PhD Candidate
Ulaanbaatar
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For citations:
Khurelbaatar A. Capital Market Development as a Driver of Economic Growth: The Case of Mongolia. Eurasian Journal of Economic and Business Studies. 2026;70(1):36-55. https://doi.org/10.47703/2789-8253-2026-1-36-55
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