ABSTRACT
This chapter highlights the role the stock market has played in the Central and South Eastern Europe (CSEE) economies. It explores how stock market indexes in the economies that introduced stock markets only recently affect industrial indexes as a proxy to the economic growth. It is generally agreed that the main role of the financial system is to spur economic growth through the efficient allocation of the financial sources. For this purpose, it is important that an economy has a sound and stabilized financial system. Stock markets after the 1990s were not new in the economies that transformed from the central planning during the last decade of the last century. The CSEE countries have all created functioning stock markets with rules similar to those in developed economies. By facilitating longer-term, more profitable investments, liquid markets improve the allocation of capital and enhance prospects for long-term economic growth. Financial markets contribute to economic development through enhancing physical capital accumulation.
