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Capital Market, Severity of Business Cycle, and Probability of an Economic Downturn

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Author Info
Tharavanij, Piyapas

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Abstract

This paper investigates the relationships of capital market, severity of economic contraction, and probability of an economic downturn. The finding supports a theoretical prediction that countries with more advanced capital markets would face less severe business cycle output contraction, and a lower chance of an economic downturn. The results hold even after controlling for other relevant variables, country specific effects, and state dependences. However, the marginal effects are small. Results are generated using panel estimation technique with panel data from 44 countries covering the years 1975 through 2004.

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File URL: http://mpra.ub.uni-muenchen.de/4953/
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File URL: http://mpra.ub.uni-muenchen.de/5189/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4953.

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Date of creation: 09 Sep 2007
Date of revision: 07 Oct 2007
Handle: RePEc:pra:mprapa:4953

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

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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
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
G00 - Financial Economics - - General - - - General
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models

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