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Financial market resilience and financial development: A global perspective

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  • Tang, Chun
  • Liu, Xiaoxing
  • Zhou, Donghai

Abstract

This paper studies the financial market resilience against short-term capital flow shocks and then examine the impact of financial development on resilience. Based on the TVP-VAR model, we construct absorption intensity and duration to measure financial market resilience from size and time dimensions. We find that the resilience of major global financial markets has steadily improved, but the resilience of developed and emerging countries differs in different periods. Moreover, extreme capital flow states and crisis events have a considerable negative impact on resilience. According to the panel regression model, further research emphasizes the role of financial development in improving resilience, especially for emerging economies. In addition, our finding shows that, to enhance the resilience of financial markets, it is necessary to focus on the development of both financial markets and financial institutions, especially to improve the depth of financial markets and the access of financial institutions.

Suggested Citation

  • Tang, Chun & Liu, Xiaoxing & Zhou, Donghai, 2022. "Financial market resilience and financial development: A global perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:intfin:v:80:y:2022:i:c:s1042443122001226
    DOI: 10.1016/j.intfin.2022.101650
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    More about this item

    Keywords

    Financial market; Resilience; Capital flows; Financial development;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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