Abstract This study investigates the intricate relationship between key capital market indicators—market capitalization and market turnover—and macroeconomic variables such as Gross Domestic Product (GDP) and Foreign Direct Investment (FDI) in Bangladesh over the period 2000 to 2023. Leveraging annual data sourced from the World Bank, Bangladesh Securities and Exchange Commission (BSEC), and Dhaka Stock Exchange (DSE), the analysis employs advanced econometric techniques, including stationarity tests, co-integration analysis, Vector Error Correction Model (VECM), Granger causality tests, and the Autoregressive Distributed Lag (ARDL) model.The findings reveal a significant long-term equilibrium relationship among the variables, with market capitalization and turnover showing a positive impact on GDP. The Granger causality test highlights bidirectional causality between market turnover and GDP, while FDI demonstrates a long-term contribution to economic growth. The inclusion of post-COVID-19 data captures unique insights into market resilience and economic recovery, providing timely guidance for policymakers and investors.This research emphasizes the critical role of an efficient and transparent capital market in driving sustainable economic growth. Policymakers are encouraged to focus on market reforms, promote financial literacy, attract foreign investment, and diversify financial instruments to enhance market efficiency and resilience. By addressing gaps in existing literature and employing a comprehensive methodological framework, this study offers valuable insights into the dynamics of capital market development in emerging economies.
Mohammad Shahriar Azad Bhuiyan (Thu,) studied this question.