• ISSN: 2010-023X (Print)
    • Abbreviated Title: Int. J. Trade, Economics and Financ.
    • Frequency: Quaterly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Managing Editor: Ms. Shira. W. Lu
    • Abstracting/ Indexing:  Crossref, CNKI, EBSCO

    • Article Processing Charge (APC): 500 USD

    • E-mail: ijtef.editorial.office@gmail.com

IJTEF 2022 Vol.13(3): 71-75 ISSN: 2010-023X
DOI: 10.18178/ijtef.2022.13.3.727

Estimating the Cost of Not Having a Stock Exchange: A Synthetic Control Approach

Etsub Tekola Jemberu

Abstract—Despite the flourishment of the financial markets all around the world as a strategy of financial reforms in the last century, 20% of the world nations are still without a stock exchange. This study examines the economic cost of not having stock exchanges in one of the largest of these countries, Ethiopia. Using a transparent data-driven econometric technique - the synthetic control method (SCM), it estimates the counterfactual GDP per capita Ethiopia would have enjoyed, had it established stock exchange in 1998. Based on a weighted average of the preintervention characteristics and income per capita of similar countries with a stock exchange, SCM constructs synthetic control unit that imitates the characteristics of the treated unit in the pre-treatment period and compares the counterfactual outcome path against the actual outcome path of the treated unit. The estimation results indicate that the synthetically constructed Ethiopia outperformed actual Ethiopia in the posttreatment year, suggesting an establishment of a stock exchange in Ethiopia would have led to a substantial increase in income per capita of the country. Specifically, on average, Ethiopia’s GDP per capita would have been 54.84 percent higher over the period of 12 years had it established a stock exchange in 1998.

Index Terms—Economic growth, income per capita, stock market, synthetic control method.

Etsub Tekola Jemberu is with Faculty of Finance and Management at Tomas Bata University in Zlín, 760 01 Zlín, the Czech Republic (e-mail: tekola@utb.cz).


Cite: Etsub Tekola Jemberu, "Estimating the Cost of Not Having a Stock Exchange: A Synthetic Control Approach," International Journal of Trade, Economics and Finance vol.13, no.3, pp. 71-75, 2022.

Copyright © 2022 by the authors. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

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