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Capital Market, Frequency Of Recession, And Fraction Of Time The Economy In Recession

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  • Piyapas Tharavanij

Abstract

This paper investigates the relationships of capital markets, frequency of recession, and fraction of time the economy is in recession. The main finding is that frequency of recession is not robustly linked to measures of capital market development. However, the fraction of time the economy spends in recession is significantly related to capital market development, though the marginal effect is small. This implies that countries with more advanced capital markets would tend to spend lower proportion of time in recession. Results are generated using quarterly data of thirty-five countries from 1975 to 2004.

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File URL: http://www.buseco.monash.edu.au/eco/research/papers/2007/3407frequencyrecessiontharavanij.pdf
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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 34-07.

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Length: 41 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mos:moswps:2007-34

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Postal: Department of Economics, Monash University, Victoria 3800, Australia
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Web page: http://www.buseco.monash.edu.au/eco/
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Keywords: business cycle; capital market; financial development; financial structure; panel data; market-based; bank-based;

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  1. den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 2000. "Liquidity Flows and Fragility of Business Enterprises," University of California at San Diego, Economics Working Paper Series qt2kc182ts, Department of Economics, UC San Diego.
  2. 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.
  3. 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.
  4. Tharavanij, Piyapas, 2007. "Capital Market and Business Cycle Volatility," MPRA Paper 4952, University Library of Munich, Germany.
  5. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
  6. 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.
  7. Piketty, Thomas & Banerjee, Abhijit & Aghion, Philippe, 1999. "Dualism and Macroeconomic Volatility," Scholarly Articles 4554124, Harvard University Department of Economics.
  8. Tharavanij, Piyapas, 2007. "Capital Market, Severity of Business Cycle, and Probability of Economic Downturn," MPRA Paper 4953, University Library of Munich, Germany.
  9. 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.
  10. 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.
  11. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-32, Nov.-Dec..
  12. 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.
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