Tharavanij, Piyapas (2007): Capital Market and Business Cycle Volatility.
This is the latest version of this item.
Download (224Kb) | Preview
This paper investigates cross-country evidence on how capital markets affect business cycle volatilities. In contrast to the large and growing literature of finance and growth, empirical work on the relationship between finance, particularly capital markets, and volatility has been relatively scarce, though theoretically, more developed capital markets should lead to lower macroeconomic volatilities. Results are generated using panel estimation technique with data from 44 countries covering the years 1975 through 2004. The major finding is that countries with more developed capital markets have smoother economic fluctuations. The results hold under various estimation methods and after controlling for other relevant variables, country specific effects, and plausible endogeneity problems.
|Item Type:||MPRA Paper|
|Institution:||Monash University, Dept. of Economics|
|Original Title:||Capital Market and Business Cycle Volatility|
|Keywords:||business cycle; capital market; financial development; financial structure; panel data; market-based; bank-based|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
G - Financial Economics > G0 - General > G00 - General
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Piyapas Tharavanij|
|Date Deposited:||07. Oct 2007|
|Last Modified:||12. Feb 2013 14:08|
Acemoglu, Daron and Zilibotti, Fabrizio. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth." Journal of political economy, 1997, 105(4), pp. 709-51. Aghion, Philippe; Banerjee, Abhijit and Piketty, Thomas. "Dualism and Macroeconomic Volatility." Quarterly Journal of Economics, 1999, 114(4), pp. 1359-97. Barro, Robert J. and Lee, Jong-Wha. "International Data on Educational Attainment: Updates and Implications." CID Working Paper No. 42, 2000. Baxter, Marianne and King, Robert G. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series." NBER working paper 5022, 1995. Beck, Thorsten and Levine, Ross. "Stock Markets, Banks, and Growth: Panel Evidence." NBER working paper 9082, 2002. Beck, Thorsten; Levine, Ross and Loayza, Norman. "Finance and the Sources of Growth." Journal of Financial Economics, 2000, 58(1-2), pp. 261-300. Beck, Thorsten; Lundberg, Mattias and Majnoni, Giovanni. "Financial Intermediary Development and Growth Volatility: Do Intermediaries Dampen or Magnify Shocks?" World Bank Policy Research Working Paper Series No.2707, 2003. Bernanke, Ben and Gertler, Mark. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission." Journal of Economic Perspectives, 1995, 9(4), pp. 27-48. Bernanke, Ben; Gertler, Mark and Gilchrist, Simon. "The Financial Accelerator in a Quantitative Business Cycle Framework." NBER working paper No. 6455, 1998. Buch, Claudia M.; Doepke, Joerg and Pierdzioch, Christian. "Financial Openness and Business Cycle Volatility." Journal of International Money and Finance, 2005, 24, pp. 744-65. Christiano, Lawrence J. and Fitzgerald, Terry J. "The Band Pass Filter." International Economic Review, 2003, 44(2), pp. 435-65. Demirguc-kunt, Asli and Levine, Ross. Financial Structure and Economic Growth: A Cross-Country Comparison of Banks, Markets, and Development. Cambridge, Massachusetts, USA: The MIT Press, 2001. Page 26 of 40 Denizer, Cevdet; Iyigun, Murat F. and Owen, Ann L. "Finance and Macroeconomic Volatility." Board of Governors of the Federal Reserve System. International Finance Discussion Papers No.670, 2000. Easterly, William; Islam, Roumeen and Stiglitz, Joseph E. "Shaken and Stirred: Explaining Growth Volatility," B. Pleskovic and J. E. Stiglitz, Annual Bank Conference on Development Economics. Washington D.C., 2000. Fecht, Falko. "On the Stability of Different Financial Systems." Journal of European Economic Association, 2004, 2(6), pp. 969-1014. Greenwald, Bruce C. and Stiglitz, Joseph E. "Financial Market Imperfections and Business Cycles." Quarterly Journal of Economics, 1993, 108(1), pp. 77-114. Haan, Wouter J. den; Ramey, Garey and Watson, Joel. "Liquidity Flows and Fragility of Business Enterprises." NBER working paper No. 7057, 1999. Haug, Alfred A. and Dewald, William G. "Longer-Term Effects of Monetary Growth on Real and Nominal Variables, Major Industrial Countries, 1880- 2001." European Central Bank working paper series No.382, 2004. Hodrick, Robert J. and Prescott, Edward C. "Postwar U.S. Business Cycles: An Empirical Investigation." Journal of Money, Credit, and Banking, 1997, 29, pp. 1-16. Karras, Georgios and Song, Frank. "Sources of Business-Cycle Volatility: An Exploratory Study on a Sample of Oecd Countries." Journal of Macroeconomics, 1996, 18(4), pp. 621-37. La-Porta, Rafael; Lopez-de-Silane, Florencio; Shleifer, Andrei and Vishny, Robert W. "Law and Finance." Journal of political economy, 1998, 106(6), pp. 1113-55. Larrain, Borja. "Financial Development, Financial Constraints, and the Volatility of Industrial Output." Public policy discussion paper, Federal Reserve Bank of Boston, 2004. Levine, Ross. "Bank-Based or Market-Based Financial Systems: Which Is Better?" NBER working paper No.9138, 2002. Levine, Ross and King, Robert G. "Finance and Growth: Schumpeter Might Be Right." Quarterly Journal of Economics, 1993, 108, pp. 717-38. Levine, Ross; Loayza, Norman and Beck, Thorsten. "Financial Intermediation and Growth: Causality and Causes." World Bank Policy Research Working Paper Series No.2059, 1999. Lopez, Jose A. and Spiegel, Mark M. "Financial Structure and Macroeconomic Performance over the Short and Long Run." Pacific Basin Working Paper series No.PB02-05, 2002. Merton, Robert C. and Bodie, Zvi. "The Design of Financial Systems: Towards a Synthesis of Function and Structure." Harvard Business School Working Paper No. 02-074, 2004. Phumiwasana, Triphon. "Financial Structure, Economic Growth and Stability," CLAREMONT GRADUATE UNIVERSITY, 2003, 131. Raddatz, Claudio. "Are External Shocks Responsible for the Instability of Output in Low-Income Countries?" World Bank Policy Research Working Paper Series No. 3680, 2005. ____. "Liquidity Needs and Vulnerability to Financial Underdevelopment." World Bank Policy Research Working Paper Series No. 3161, 2003. Rajan, Raghuram and Zingales, Luigi. "Financial Systems, Industrial Structure, and Growth." Oxford Review of Economic Policy, 2001, 17(4), pp. 467-81. Silva, Gisele Ferreira da. "The Impact of Financial System Development on Business Cycles Volatility: Cross-Country Evidence." Journal of Macroeconomics, 2002, 24(2), pp. 233-53. Stock, James H. and Watson, Mark W. "Business Cycle Fluctuations in Us Macroeconomic Time Series." NBER working paper No. 6528, 1998. Tiryaki, Gisele Ferreira. "Financial Development and Economic Fluctuations." Middle East Technical University Studies in Development, 2003, 30(1), pp. 89-106.
Available Versions of this Item
Capital Market and Business Cycle Volatility. (deposited 18. Sep 2007)
- Capital Market and Business Cycle Volatility. (deposited 07. Oct 2007) [Currently Displayed]