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. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc.
    • 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.
  2. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  3. Daron Acemoglu & Fabrizio Zilibotti, 1994. "Was Prometheus unbound by chance? Risk, diversification and growth," Economics Working Papers 98, Department of Economics and Business, Universitat Pompeu Fabra.
  4. J. François OUTREVILLE, 1999. "Financial Development, Human Capital And Political Stability," UNCTAD Discussion Papers 142, United Nations Conference on Trade and Development.
  5. Claudia M. Buch & Jörg Döpke & Christian Pierdzioch, 2002. "Financial Openness and Business Cycle Volatility," Kiel Working Papers 1121, Kiel Institute for the World Economy.
  6. Borja Larrain, 2004. "Financial development, financial constraints, and the volatility of industrial output," Public Policy Discussion Paper 04-6, Federal Reserve Bank of Boston.
  7. 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.
  8. Greenwald, Bruce C & Stiglitz, Joseph E, 1993. "Financial Market Imperfections and Business Cycles," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 77-114, February.
  9. Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers 98-03, C.V. Starr Center for Applied Economics, New York University.
  10. 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.
  11. Piketty, Thomas & Banerjee, Abhijit & Aghion, Philippe, 1999. "Dualism and Macroeconomic Volatility," Scholarly Articles 4554124, Harvard University Department of Economics.
  12. Levine, Ross, 2002. "Bank-Based or Market-Based Financial Systems: Which Is Better?," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 398-428, October.
  13. 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.
  14. Raddatz, Claudio, 2005. "Are external shocks responsible for the instability of output in low income countries?," Policy Research Working Paper Series 3680, The World Bank.
  15. Norman Loayza & Romain Ranciere, 2002. "Financial Development, Financial Fragility, and Growth," CESifo Working Paper Series 684, CESifo Group Munich.
  16. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  17. Loayza, Norman V. & Raddatz, Claudio, 2006. "The structural determinants of external vulnerability," Policy Research Working Paper Series 4089, The World Bank.
  18. 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.
  19. Wouter J. den Haan & Garey Ramey & Joel Watson, 1999. "Liquidity Flows and Fragility of Business Enterprises," Cowles Foundation Discussion Papers 1215, Cowles Foundation for Research in Economics, Yale University.
  20. Falko Fecht, 2004. "On the Stability of Different Financial Systems," Journal of the European Economic Association, MIT Press, vol. 2(6), pages 969-1014, December.
  21. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
  22. 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 0382, European Central Bank.
  23. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  24. 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.
  25. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  26. Raghuram G. Rajan & Luigi Zingales, 2001. "Financial Systems, Industrial Structure, and Growth," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 467-482.
  27. 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.
  28. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
  29. Matías Braun & Borja Larrain, 2005. "Finance and the Business Cycle: International, Inter-Industry Evidence," Journal of Finance, American Finance Association, vol. 60(3), pages 1097-1128, 06.
  30. 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.
  31. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  32. Denizer, Cevdet & Iyigun, Murat F. & Owen, Ann L., 2000. "Finance and macroeconomic volatility," Policy Research Working Paper Series 2487, The World Bank.
  33. Ferreira da Silva, Gisele, 2002. "The impact of financial system development on business cycles volatility: cross-country evidence," Journal of Macroeconomics, Elsevier, vol. 24(2), pages 233-253, June.
  34. Levine, Ross, 1992. "Financial structures and economic development," Policy Research Working Paper Series 849, The World Bank.
  35. 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.
  36. Karras, Georgios & Song, Frank, 1996. "Sources of business-cycle volatility: An exploratory study on a sample of OECD countries," Journal of Macroeconomics, Elsevier, vol. 18(4), pages 621-637.
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. Atanas Christev & Jacques Melitz, 2013. "EMU, EU, Market Integration and Consumption Smoothing," Open Economies Review, Springer, vol. 24(5), pages 789-818, November.
  2. Mallick, Debdulal, 2009. "Financial Development, Shocks, and Growth Volatility," MPRA Paper 17799, University Library of Munich, Germany.
  3. Atanas CHRISTEV & Jacques MELITZ, 2010. "EMU, EU, Capital Market Integration and Consumption Smoothing," Working Papers 2010-06, Centre de Recherche en Economie et Statistique.
  4. Piyapas Tharavanij, 2007. "Capital Market, Severity Of Business Cycle, And Probability Of An Economic Downturn," Development Research Unit Working Paper Series 32-07, Monash University, Department of Economics.
  5. Piyapas Tharavanij, 2007. "Capital Market, Frequency Of Recession, And Fraction Of Time The Economy In Recession," Development Research Unit Working Paper Series 34-07, 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.