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This paper investigates the interdependence between financial system development, particularly capital market development and economic growth, in Serbia by using the series of yearly data from the World Bank Development database indicators. Numerous variables concerning market size and liquidity are analysed, but also some macroeconomic indicators, such as government consumption, interest and inflation rates. The data are tested for stationarity by employing the Augmented Dickey–Fuller test and thereafter the Granger causality test is carried out to determine the long-run causality between the variables. Additionally, several regression models are estimated to identify the variables that have a crucial role in stimulating economic growth. The results obtained confirm the supply-leading hypothesis, thus emphasizing the role of capital market development in stimulating economic growth. [ABSTRACT FROM PUBLISHER]