I believe answering such questions needs empirical tools not speculations, unless one is an armchair economist. At the starting point must be reality, then we can sit and theorise that reality
Do financial markets drive real economy? We can approach it with causal discovery tools over two time-series. We almost surely know that there is no connection between these two, for instance from papers such as IMF paper of Igan et al. 2020. Also there is a body of evidence that gdp drives financial markets, not vice versa
However, I believed that to address this specific question we have to casually study the relation between fixed capital formation or real investment and financial market growth. The literature here is inconclusive, e.g. Muyambiri2018, to the best of my knowledge.
Overall, It seems that financial markets do not have any significant effect on the real economy (e.g. look at the booming market of Caracas, Venezuela) moreover, , if we think about the human resources engaged with the financial market instead if doing something real, we can conclude that the effect is adverse.
I believe answering such questions needs empirical tools not speculations, unless one is an armchair economist. At the starting point must be reality, then we can sit and theorise that reality
I like your instinct here, but bear in mind that “empirical tools” does not necessarily mean spreadsheets. Numerical time series are not a very rich data source, compared to the wealth of information we can get by e.g. directly watching the day-to-day activities of market participants, or doing some accounting to track down the physical capital in which money ends up invested.
I believe answering such questions needs empirical tools not speculations, unless one is an armchair economist. At the starting point must be reality, then we can sit and theorise that reality
Do financial markets drive real economy? We can approach it with causal discovery tools over two time-series. We almost surely know that there is no connection between these two, for instance from papers such as IMF paper of Igan et al. 2020. Also there is a body of evidence that gdp drives financial markets, not vice versa
However, I believed that to address this specific question we have to casually study the relation between fixed capital formation or real investment and financial market growth. The literature here is inconclusive, e.g. Muyambiri2018, to the best of my knowledge.
Overall, It seems that financial markets do not have any significant effect on the real economy (e.g. look at the booming market of Caracas, Venezuela) moreover, , if we think about the human resources engaged with the financial market instead if doing something real, we can conclude that the effect is adverse.
I like your instinct here, but bear in mind that “empirical tools” does not necessarily mean spreadsheets. Numerical time series are not a very rich data source, compared to the wealth of information we can get by e.g. directly watching the day-to-day activities of market participants, or doing some accounting to track down the physical capital in which money ends up invested.