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

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  • Tharavanij, Piyapas

Abstract

This paper investigates the effect of capital market development on severity of economic contraction, and probability of economic downturn. The major finding is that countries with deeper capital market would face less severe business cycle output contraction, and lower chance of an economic downturn. The results hold even after controlling for other relevant variables, country specific effects, and state dependence. However, marginal effects are relatively 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/5189/
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Bibliographic 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
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Handle: RePEc:pra:mprapa:4953

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

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References

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Cited by:
  1. Abu Nurudeen, 2009. "Does Stock Market Development Raise Economic Growth? Evidence from Nigeria," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 1(1), pages 015-026, December.
  2. 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.

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