THE RELATIONSHIP BETWEEN PUBLIC WELFARE AND STOCK MARKET DEVELOPMENT: THE EXPERIENCE OF EASTERN EUROPEAN COUNTRIES

Abstract

The article examines the relationship between stock market development and public welfare using the example of Eastern European countries. The relevance of the study is determined by the growing importance of investment markets in ensuring sustainable socio-economic development, increasing household financial well-being, and stimulating long-term economic growth. Special attention is paid to the role of the stock market as one of the key segments of the investment market capable of influencing capital accumulation, investment activity, financial stability, and the overall quality of life of the population. The paper analyzes theoretical approaches to the interpretation of public welfare and identifies its key economic and social components. It is emphasized that welfare cannot be assessed solely through income indicators, since it also includes education, healthcare, social protection, and quality of life. To conduct the empirical analysis, GDP per capita and the Human Development Index (HDI) were selected as the main indicators of public welfare, while stock market capitalization and stock trading value relative to GDP were chosen as indicators of stock market development. The research is based on annual statistical data for Poland, Romania, Slovakia, Hungary, and the Czech Republic covering the period from 2000 to 2023. The results of correlation analysis demonstrate that the relationship between stock market development and public welfare differs substantially across the analyzed countries. In several countries, moderate or strong positive correlations were identified between welfare indicators and stock market performance, indicating that the expansion of financial markets may contribute to higher economic prosperity and improved social conditions. At the same time, some countries showed weak or negative correlations, which may be explained by structural imbalances, institutional weaknesses, insufficient financial market maturity, or specific macroeconomic conditions. The aggregated results for the entire group of countries revealed predominantly moderate positive relationships between the analyzed indicators, although the relationship between GDP per capita and stock market capitalization appeared almost insignificant. It is confirmed that stock market development can serve as an important factor in improving both economic and socio-economic welfare by stimulating investment activity, expanding financial opportunities for households, and increasing the efficiency of capital allocation. Simultaneously, higher levels of public welfare create favorable conditions for the intensification of investment activity and the expansion of financial markets.