Capital Market And Business Cycle Volatility

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Capital Market And Business Cycle Volatility

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.

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

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Length: 44 pages
Date of creation: 04 Oct 2007
Date of revision:
Handle: RePEc:mos:moswps:2007-33

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
G00 - Financial Economics - - General - - - General
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-08-08 (All new papers)
NEP-BEC-2009-08-08 (Business Economics)
NEP-MAC-2009-08-08 (Macroeconomics)

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.:

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Full references

Cited by:
(explanations, 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.)

Mallick, Debdulal, 2009. "Financial Development, Shocks, and Growth Volatility," MPRA Paper 17799, University Library of Munich, Germany. [Downloadable!]

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