This paper investigates the dynamic relationship between stock market development and economic growth, explicitly examining how institutional quality conditions this link and whether effects differ between advanced economies versus emerging and developing countries. Employing the local projections method, we analyze annual panel data for 96 countries from 2003 to 2022, utilizing six dimensions of institutional quality. Results show that there are positive effects of stock market development on economic growth in a statistically significant way, but these effects are profoundly conditional on the institutional environment and vary significantly across country groups. Strong administrative and legal institutions enhance this effect in advanced economies, whereas weak institutions across all measures are associated with larger relative positive effects in emerging and developing countries. Important policy suggestions follow.
