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Linking the missing market: The effect of bond markets on economic growth

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  • Thumrongvit, Patara
  • Kim, Yoonbai
  • Pyun, Chong Soo
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    Abstract

    Past studies have largely focused on the positive role of banks and stock markets on economic growth. This paper adds bond markets as a third key component of the financial system. Using a panel data set of 38 countries, and applying the generalized method of moments techniques for dynamic panels, we find that (i) stock market development is positively related to economic growth; (ii) the contributing role of bank credit to economic growth diminishes as domestic bond markets develop; (iii) government bonds are positively related to economic growth, while the effects of corporate bonds change from negative to positive, as domestic financial structures expand in size and diversity.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1059056013000099
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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Economics & Finance.

    Volume (Year): 27 (2013)
    Issue (Month): C ()
    Pages: 529-541

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    Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:529-541

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    Web page: http://www.elsevier.com/locate/inca/620165

    Related research

    Keywords: Financial market; Economic growth; Panel data analysis; Bond markets;

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    Cited by:
    1. Fernandez-Perez, Adrian & Fernández-Rodríguez, Fernando & Sosvilla-Rivero, Simón, 2014. "The term structure of interest rates as predictor of stock returns: Evidence for the IBEX 35 during a bear market," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 21-33.
    2. Owen, Ann L. & Temesvary, Judit, 2014. "Heterogeneity in the growth and finance relationship: How does the impact of bank finance vary by country and type of lending?," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 275-288.
    3. Huang, Ho-Chuan (River) & Fang, WenShwo & Miller, Stephen M., 2014. "Does financial development volatility affect industrial growth volatility?," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 307-320.

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