On the Issue of the Mutual Connection between the Securities Market and Economic growth

https://doi.org/10.52340/eab.2024.16.01.09 On the one hand, the level of economic development of the country creates the prerequisites for the development of the stock market, and on the other hand, the securities market itself is an important factor in the development and growth of the real economy.The mechanisms of the financial system are complex and varied. The list of securities and functions of the financial market is extensive. Among them we can highlight: the function of corporate control, the function of implementing risk management; function of stimulating entrepreneurship: function of promoting trade in goods, services, contracts. The principles of creating a single defragmented market are being implemented by regulators.The securities market will transform into a global market. The trading process becomes continuous. Nowadays, public trading on the stock exchange is becoming optional.Growth theorists have focused on the relationship between financial systems and economic growth since the 1990s. According to their findings, long-term economic growth is positively related to both banking development and stock market development. In the authors` study, indicators such as the cost of transactions in domestic stocks on domestic markets showed a significant statistical and economic effect. According to many authors, this indicator characterizes the liquidity of the national stock market, its growth indicates positive changes in the market itself and, possibly, a strengthening of the role of the stock market in the economy.Recently, some authors have favored the stock market. This highlights the powerful potential of liquid, mature equity and bond markets to drive productivity growth in the economy.At the same time, the growth risk approach has become established as a risk analysis tool and is widely used in the regular analysis of countries by the International Monetary Fund (Country Surveillance). The mentioned approach also has weaknesses: the economic growth risk approach is not a structural model and, therefore, cannot be used to assess cause-and-effect relationships. However, to obtain strategically important results, a large amount of data is required, the approach is currently being actively developed and there is the possibility of expanding it.The Georgian corporate bond market at the end of 2023 exceeded GEL 1.9 billion. If we compare the volume of funds raised by bank loans and bonds in terms of company financing in the European Union, bonds account for an average of 24%, while in Georgia the banking sector clearly dominates the financial market.The increased attention of the population to the securities market is the result of not only an increase in the standard of living in the country, but also an increase in knowledge about the basic principles of this market and its functioning. It is important to create a positive image of the securities market for local and foreign investors. For this sake, it is necessary to create a system for disseminating knowledge and information about the Georgian securities market, to gain trust in it and in the instruments traded on it.Particular attention should be paid to simplifying the procedures for introducing innovative and scientific products to the securities market.It is impossible to solve all the problems facing the Georgian securities market at once, but in the near future such tasks must be solved as: increasing the volume and complexity of the financial market; effective provision of market infrastructure; creating a favorable tax environment for participants, improving the legal regulation of the financial market.The information disclosure system is very important for the development of the securities market. Particular attention should be paid to disclosing the ownership structure of the company`s shareholders, as well as disclosing information during the public offering of securities of enterprises and when trading foreign securities.Nowadays, there is a tendency to reduce national securities markets in the world. Those markets that remain will turn into financial centers. Creating such a regional center in Georgia requires a lot of time and effort on the part of securities market participants and regulatory authorities. References:• Likokeli A. (2020). Finansuri pirobebis gavlena ekonomikuri zrdis riskebze sakartveloshi. The Impact of Financial Conditions on Risks to Economic Growth in Georgia. Economics and Banking. Vol. 7. No1. pp. 54-68. in Georgian• Mikabadze E. (2024). Korporaciuli obligaciebis bazars sakartveloshi shemdgomi zrdis mnishvnelovani potenciali gaachnia. Georgian Corporate Bond Market Has Significant Potential for Future Growth. in Georgian https:/www.ngb.gov.ge • Qoqiauri L., Shonia N. (2008). Fasiani qagaldebis bazari Securities Market. in Georgian.• Cave J., Chaudhuri K., Kumbhaker S.C. (1993). Do Banking Sector and Stock Market Development Matter for Economic Growth?//Empirial Economics, Springer. Vol. 59(4), pp. 1513-1535. • King K.G., Levine R. (1993). Finance and Growth: Shumpeter might be right//Quarterly Journal of Economics. Vol. 108(3), pp. 717-787.• Rioja F., Valev N. (2014). Stock Markets. Banks and the Sources of Economic Grouth in low and Nigh Income Countries//Journal of Economics and Finance. Vol. 38(2), pp. 302-320. • International Monetary Fund (2017). Global Financial Stability Report. October 2017. Is Growth at Risk? pp. 91-116, https:/www.inof.org/en/Publiotations/GFSK/Issues/2017/09/27/global-financial-stability-report-october-2017 Regulation NMS. https:/www.sec.gov/rules/proposed (34-50870.htm).• Regulation N MS. https:/www.sec.gov/rules/proposed (34-50870.htm).• https://nbg.gov.ge• https://gse.ge Keywords: Economic growth, functions of the financial market, stock industry, approach to the risks of economic growth.JEL Codes: E44, G15, G32, O47