Advanced Search
MyIDEAS: Login to save this paper or follow this series

Capital Market And Business Cycle Volatility

Contents:

Author Info

  • Piyapas Tharavanij

Abstract

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.buseco.monash.edu.au/eco/research/papers/2007/3307businesscyclevolatilitytharavanij.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 33-07.

as in new window
Length: 44 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mos:moswps:2007-33

Contact details of provider:
Postal: Department of Economics, Monash University, Victoria 3800, Australia
Phone: +61-3-9905-2493
Fax: +61-3-9905-5476
Email:
Web page: http://www.buseco.monash.edu.au/eco/
More information through EDIRC

Order Information:
Email:
Web: http://www.buseco.monash.edu.au/eco/research/papers/

Related research

Keywords: business cycle; capital market; financial development; financial structure; panel data; market-based; bank-based;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Beck, T.H.L. & Lundberg, M. & Majnoni, G., 2006. "Financial intermediary development and growth volatility: Do intermediaries dampen or magnify shocks?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125497, Tilburg University.
  2. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band pass filter," Working Paper 9906, Federal Reserve Bank of Cleveland.
    • Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
  3. Norman V. Loayza & Claudio Raddatz, 2007. "The Structural Determinants of External Vulnerability," World Bank Economic Review, World Bank Group, World Bank Group, vol. 21(3), pages 359-387, October.
  4. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, Elsevier, vol. 58(1-2), pages 261-300.
  5. Romain Ranciere & Norman Loayza, 2004. "Financial Development, Financial Fragility and Growth," Working Papers 192, Barcelona Graduate School of Economics.
  6. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  7. Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
  8. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers, C.V. Starr Center for Applied Economics, New York University 95-15, C.V. Starr Center for Applied Economics, New York University.
  9. Beck, T.H.L. & Levine, R., 2004. "Stock markets, banks and growth: Panel evidence," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125506, Tilburg University.
  10. Falko Fecht, 2003. "On the Stability of Different Financial Systems," Working Paper Series: Finance and Accounting 110, Department of Finance, Goethe University Frankfurt am Main.
  11. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(3), pages 717-37, August.
  12. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  13. Wouter J. den Haan & Garey Ramey & Joel Watson, 1999. "Liquidity Flows and Fragility of Business Enterprises," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1215, Cowles Foundation for Research in Economics, Yale University.
  14. Raddatz, Claudio, 2007. "Are external shocks responsible for the instability of output in low-income countries?," Journal of Development Economics, Elsevier, vol. 84(1), pages 155-187, September.
  15. Ross Levine, 2002. "Bank-Based or Market-Based Financial Systems: Which is Better?," NBER Working Papers 9138, National Bureau of Economic Research, Inc.
  16. James H. Stock & Mark W. Watson, 1998. "Business Cycle Fluctuations in U.S. Macroeconomic Time Series," NBER Working Papers 6528, National Bureau of Economic Research, Inc.
  17. Borja Larrain, 2004. "Financial development, financial constraints, and the volatility of industrial output," Public Policy Discussion Paper, Federal Reserve Bank of Boston 04-6, Federal Reserve Bank of Boston.
  18. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(4), pages 709-51, August.
  19. Cevdet Denizer & Murat Iyigun & Ann Owen, 2000. "Finance and Macroeconomic Volatility," Macroeconomics, EconWPA 0004015, EconWPA.
  20. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
  21. Claudia M. Buch & Jörg Döpke & Christian Pierdzioch, 2002. "Financial Openness and Business Cycle Volatility," Kiel Working Papers 1121, Kiel Institute for the World Economy.
  22. Ferreira da Silva, Gisele, 2002. "The impact of financial system development on business cycles volatility: cross-country evidence," Journal of Macroeconomics, Elsevier, Elsevier, vol. 24(2), pages 233-253, June.
  23. Piketty, Thomas & Banerjee, Abhijit & Aghion, Philippe, 1997. "Dualism and macroeconomic volatility," CEPREMAP Working Papers (Couverture Orange) 9720, CEPREMAP.
  24. Raghuram G. Rajan & Luigi Zingales, 2001. "Financial Systems, Industrial Structure, and Growth," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 17(4), pages 467-482.
  25. Greenwald, Bruce C & Stiglitz, Joseph E, 1993. "Financial Market Imperfections and Business Cycles," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(1), pages 77-114, February.
  26. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  27. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  28. Ross Levine, 1990. "Financial structure and economic development," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 381, Board of Governors of the Federal Reserve System (U.S.).
  29. Haug, Alfred A. & Dewald, William G., 2004. "Longer-term effects of monetary growth on real and nominal variables, major industrial countries, 1880-2001," Working Paper Series, European Central Bank 0382, European Central Bank.
  30. Matias Braun & Borja Larrain, 2004. "Finance and the Business Cycle: International, Inter-industry Evidence," Finance, EconWPA 0403001, EconWPA.
  31. Jose A. Lopez & Mark M. Spiegel, 2002. "Financial structure and macroeconomic performance over the short and long run," Pacific Basin Working Paper Series 2002-05, Federal Reserve Bank of San Francisco.
  32. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc.
  33. J. François OUTREVILLE, 1999. "Financial Development, Human Capital And Political Stability," UNCTAD Discussion Papers, United Nations Conference on Trade and Development 142, United Nations Conference on Trade and Development.
  34. Karras, Georgios & Song, Frank, 1996. "Sources of business-cycle volatility: An exploratory study on a sample of OECD countries," Journal of Macroeconomics, Elsevier, Elsevier, vol. 18(4), pages 621-637.
  35. Robert C. Merton & Zvi Bodie, 2004. "The Design of Financial Systems: Towards a Synthesis of Function and Structure," NBER Working Papers 10620, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mallick, Debdulal, 2009. "Financial Development, Shocks, and Growth Volatility," MPRA Paper 17799, University Library of Munich, Germany.
  2. Atanas Christev & Jacques Melitz, 2013. "EMU, EU, Market Integration and Consumption Smoothing," Open Economies Review, Springer, Springer, vol. 24(5), pages 789-818, November.
  3. Piyapas Tharavanij, 2007. "Capital Market, Frequency Of Recession, And Fraction Of Time The Economy In Recession," Development Research Unit Working Paper Series, Monash University, Department of Economics 34-07, Monash University, Department of Economics.
  4. Atanas CHRISTEV & Jacques MELITZ, 2010. "EMU, EU, Capital Market Integration and Consumption Smoothing," Working Papers, Centre de Recherche en Economie et Statistique 2010-06, Centre de Recherche en Economie et Statistique.
  5. Piyapas Tharavanij, 2007. "Capital Market, Severity Of Business Cycle, And Probability Of An Economic Downturn," Development Research Unit Working Paper Series, Monash University, Department of Economics 32-07, Monash University, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mos:moswps:2007-33. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Angus).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.