“ Stock market , real estate market , and economic growth : an ARDL approach

The paper investigates the correlation between stock market, real estate market, and economic growth in Vietnam, which is an emerging country. Quarterly data in Vietnam from the third quarter of 2004 to the third quarter of 2018 were utilized. By using the Autoregressive Distributed Lag (ARDL) approach, the results reveal that economic growth is positively associated with stock market and real estate market. An unprecedented finding of this study is that economic growth (GDP) is more correlated to stock market efficiency (SME) than net trading value by foreign investors (FI). Moreover, global financial crisis (GFC) exerts a negative impact on economic growth and real estate market in Vietnam. Further, net trading value by foreign investors (FI) also negatively influences real estate market (REM) in the short term. The study has greatly succeeded in giving first empirical evidence on the relationship between stock market, real estate market, and economic growth in Vietnam. More than that, the results show the key role of global financial crisis in this correlation. The findings are valuable to economies around the world, especially bringing a practical and meaningful value to developing countries like Vietnam.


INTRODUCTION
The impact of stock market on economic growth was first studied by Goldsmith (1969). This influence has been also reported by a majority of scholars, namely Levine and Zervos (1998), Arestis, Demetriades, and Luintel (2001), Enisan and Olufisayo (2009), Shahbaz, Ahmed, and Ali (2008), Ake (2010), Ngare, Nyamongo, and Misati (2014), Pan and Mishra (2017), Fufa and Kim (2018). Also, the nexus between real estate market and economic growth has been attracting more and more attention in recent empirical research (Bouchouicha & Ftiti, 2012). In fact, Schmalz, Sraer, and Thesmar (2016) highlighted the significant impact of real estate market on economic growth. Furthermore, there exists a close association between stock market and real estate market. Although this correlation has been concluded in many empirical studies (for example, Liu  Along with stock and real estate market, national economic growth is also greatly influenced by global financial crisis (Miller, Peng, & Sklarz, 2011). However, most of existing studies have hardly analyzed the role of global financial crisis in the correlation between stock market, real estate market, and economic growth. Therefore, this study is

Economic growth and stock market
The relationship between economic growth and stock market was first mentioned by Goldsmith (1969). Accordingly, stock market would supply investors an effective investment channel and raise long-run capital sources for firms, as well as the economy, thereby boosting the economy. Moreover, stock market would stimulate the effective allocation of resources in the economy, foster both domestic and foreign investment, which, in turn, boost the economic growth (Carp, 2012).
Most of earlier scholars have concluded that stock market exerts a positive impact on economic growth (for example, Levine

Economic growth and real estate market
When real estate market grows, household wealth and loan capacity increase, stimulating the expenditure and investment in the economy, which serves as the basis for economic growth (Miller et al., 2011;Schmalz et al., 2016). However, recession in real estate market brings out a decline in the expenditure and investment, and then exerts a negative impact on the economic growth (Nneji, Brooks, & Ward, 2013). In fact, the recession in real estate market activates the most global financial crises and makes it difficult to develop the economy (Zhao, Zhan, Jiang, & Pan, 2017). Recently, Lim (2018) claimed that the impact of the real estate market is bigger in the economies with less developed financial systems.
A vast majority of previous studies have revealed that real estate market actively affects the economic growth. However, some studies have also found a negative nexus between real estate market and economic growth. For instance, Crowe, Dell'Ariccia, Igan and Rabanal (2013) stated that an excessive increase in the real estate market will create a bubble phenomenon, thereby causing a financial crisis and eventually an economic recession in the future.
In the opposite direction, economic growth may exert a positive influence on real estate market. It is because a positive economic growth helps citizens improve their income, increase their housing demands, thereby stimulating the real estate market. This impact has been concluded by Igan, Kabundi, Simone, Pinheiro, and Tamirisa Consequently, there have been many views on the correlation between economic growth and real estate market, but the main trend is positive. Hence, the following hypotheses are proposed: H 2a : Economic growth is positively influenced by real estate market.
H 2b : Real estate market is positively influenced by economic growth.

Stock market and real estate market
There may exist a bilateral causality between stock market and real estate market. Indeed, de-velopments in the stock market give a rise to the investors' income, as well as their demands for residential and investing housing, thereby boosting the real estate market. On the other hand, these developments improve the capital from stock market into real estate market (via real estate investment funds and listed real estate firms), leading to the developments in real estate market. Hence, stock market may have a positive impact on real estate market. In the other direction, when real estate market grows, it becomes easier for real estate holders to access to capital via mortgage-backed securities for the investment expansion, which, in turn, fosters the development in the stock market. Thus, stock market is possibly correlated to real estate market. This relationship has been confirmed in the works analyses of Su (2011) Nevertheless, it is also believed that stock market may be negatively associated with real estate market. Accordingly, developments in stock market give rise to investment capital to real estate market. However, if this increases excessively, bubbles are more likely to occur in the market, facing risks of a future crisis and dramatic fall. This is similar to the impact of real estate market on stock market. This negative nexus has been clearly reported in the studies of Liu and Su Consequently, there have been contradictory views on the relationship between stock market and real estate market, but the main trend is positive. Following this, the following hypotheses are suggested: The data collection is conducted in Vietnam, a developing country with a nascent stock and real estate market. Vietnam is chosen for this analysis for two reasons: (1) stock market and real estate market are two attractive investment channels. Also, there may exist a relationship between stock market, real estate market, and economic growth in Vietnam; and (2) due to its integration into the global economy, global financial crisis may play a major role in this correlation.

Methodology
The ARDL approach is used to analyze the correlation between stock market, real estate market, and economic growth in Vietnam. The ARDL approach suggested by Pesaran, Shin, and Smith

Descriptive statistics
The data collected between the third quarter of 2004 and the third quarter of 2018, with the variables, are shown in Table 1. During the study, the economic growth of Vietnam reached its highest value in the last quarter of 2007 (9.5%). The main factors contributing That is because Vietnam was passively influenced by the global financial crisis. Note: *, **, and *** indicate significance at the 10%, 5%, and 1% level, respectively. Table 2 indicates that economic growth (GDP) is negatively associated with global financial crisis (GFC). Meanwhile, other variables (SME, FI, REM) are positively related to economic growth (GDP). On the other hand, there is a positive relationship between real estate market (REM) and stock market efficiency (SME). Furthermore, global financial crisis (GFC) is negatively correlated to stock market efficiency (SME) and real estate market (REM).

Unit root test
Results of Augmented Dickey-Fuller test (ADF) suggested by Dickey and Fuller (1979) for testing the stationarity of data series are presented in Table 3.

ARDL bound testing cointegration
Next, the lag of variables is determined by using the Bayesian Information Criterion (BIC) model. The ARDL bound test approach suggested by Pesaran et al. (2001) is utilized for testing the cointegration in the long run. Its results are shown in Table 4.
It can be seen from

Coefficient estimation results
Results of analysing the correlation between stock market, real estate market, and economic growth in Vietnam using the ARDL approach are presented in Table 5. Table 5 indicates that Model 1 and Model 4 are significant at one percent level. The results of the autocorrelation test show that there is no serial correlation. The heteroskedasticity test reveals that the models are free of heteroskedasticity issues. The Ramsey reset confirms they do not suffer from omitted variables.
Stability is also tested by using CUSUM squared. Figure 2 indicates that CUSUM squared is within the standard bound, with a significance level of 5%. It means that Model 1 and Model 4 have stability and validity. Note: * , ** , and *** indicate significance at the 10%, 5%, and 1% level, respectively.

DISCUSSION
In the short run and the long run, stock market (SME, FI) exerts a positive impact on economic growth (GDP), with a significance level of 1% (Table 5). That economic growth (GDP) was more affected by stock market efficiency (SME) than net trading value by foreign investors (FI) is an unprecedented finding (see Figure 3). It can be concluded that stock market efficiency (SME) and net trading value by foreign investors (FI) are essential to stimulate the economic growth in Vietnam. Hence, the hypotheses H 1a and H 1b are accepted. The positive effect of stock mar-ket efficiency (SME) has been also found in the studies of Carp (2012) and Fufa and Kim (2018). Concurrently, the positive impact of net trading value by foreign investors (FI) is also in line with what was reported by Mishra et al. (2010). This indicates that trading in stock market greatly contributes to the supply of medium-and longterm capital to the economy. In addition, stock market helps the stimulation of efficient investment and capital allocation. Consequently, although being nascent, Vietnam ese stock market has a positive impact on economic growth. This finding is meaningful to Vietnam, as well as other developing countries. In the short run and the long run, real estate market (REM) is positively associated with economic growth (GDP) (see Figure 4). Thus, real estate market has also significantly contributed to the stimulation of economic growth. This means that the hypothesis H2 a is accepted. This finding is consistent with what have been claimed by Miller et al. (2011) and Schmalz et al. (2016). This reveals that developments in the housing market help the real estate holders facilitate the access to capital via mortgage-backed securities, raise their expenditures and investments, which, in turn, boost the economy. It can thus be concluded that real estate is important in fostering the economic growth in Vietnam. This finding is also essential for Vietnam, as well as other developing economies.
In the short run, the influence of net trading value by foreign investors (FI) on real estate market (REM) is negative and significant at the 5% level (see Figure 5). Despite being contradictory to earlier scholars, this finding really fits the context in Vietnam. In particular, its stock market is quite young with limited and volatile trading value by foreign investors. Further, more investments from foreign investors leads to a tendency to the rise in investments by domestic ones. Nevertheless, the instability of trading value by foreign investors (especially when the economy experiences difficulties) exerts a negative impact on stock market as well as income of domestic investors, so they will limit their investments in real estate market, decreasing its capital flow and eventually the market.  2004q3  2005q1  2005q3  2006q1  2006q3  2007q1  2007q3  2008q1  2008q3  2009q1  2009q3  2010q1  2010q3  2011q1  2011q3  2012q1  2012q3  2013q1  2013q3  2014q1  2014q3  2015q1  2015q3  2016q1  2016q3  2017q1  2017q3  2018q1  2018q3 REM FI In the short run and the long run, economic growth (GDP) and real estate market (REM) are negatively affected by global financial crisis (GFC) (see Figure 6). This finding is aligned with the reality that Vietnam has been integrated into the global economy, so being influenced by global financial crisis is unavoidable.

CONCLUSION
The findings reveal that economic growth is positively associated with stock market and real estate market. With respect to stock market, the result that economic growth (GDP) is more influenced by stock market efficiency (SME) than net trading value by foreign investors (FI) is a novelty of this study. Furthermore, economic growth (GDP) and real estate market (REM) are negatively influenced by global financial crisis (GFC). More than that, real estate market (REM) is negatively influenced by net trading value by foreign investors (FI) in the short run. Thus, there is a close relationship between stock market, real estate market, and economic growth in Vietnam. In addition, the key role of global financial crisis cannot be denied in this correlation. These findings are significantly meaningful to the economies around the world, especially to the developing countries like Vietnam.
Based on these findings, Vietnamese government can develop the appropriate policies for a sustainable development of stock and real estate market in the combination with the stimulation of economic growth, for instance: (1) the government should establish the policies that develop stock market effectively, particularly concentrating on attracting national, as well as foreign investors, into Vietnamese stock market, thereby improving the stock market efficiency and net trading value by foreign investors and most notably boosting the economic growth; (2) policies should be formulated to actively manage and constantly develop real estate market and meet its actual demands; (3) the government should also make use of the opportunities created by global economic integration, with forecast improvements to reduce the negative impact of unusual situations in the global economy (global financial crisis, etc.).