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Credit buildups and the stock market in four East Asian economies

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  • Kim, Jong Hun
  • Rousseau, Peter L.

Abstract

We examine the relationship between intermediaries, stock markets, and real activity in four East Asian crisis economies (Indonesia, Korea, Malaysia, and Thailand) using a series of comparative vector autoregressive and error correction models with quarterly data from 1995 through 2010, thus including both the financial crises of 1997–1998 and 2008–2009. Although we find generally positive effects of stock market development and liquidity on growth and investment for all four countries, expansion in traditional measures of financial development do not promote growth, and even have strongly negative effects for Indonesia and Korea. The results from these economies suggest that credit can build up to the point of “saturation,” and that a well-functioning stock market can serve as a growth-promoting outlet for funds as a financial system expands and evolves.

Suggested Citation

  • Kim, Jong Hun & Rousseau, Peter L., 2012. "Credit buildups and the stock market in four East Asian economies," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 489-503.
  • Handle: RePEc:eee:jmacro:v:34:y:2012:i:2:p:489-503
    DOI: 10.1016/j.jmacro.2012.01.004
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    References listed on IDEAS

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    Cited by:

    1. Víctor Alexánder Díaz España, 2014. "Crédito privado, crédito bancario y producto interno bruto: evidencia para una muestra suramericana," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 32(73), pages 104-126, July.
    2. Koong, Seow Shin & Law, Siong Hook & Ibrahim, Mansor H., 2017. "Credit expansion and financial stability in Malaysia," Economic Modelling, Elsevier, vol. 61(C), pages 339-350.
    3. repec:psc:journl:v:9:y:2017:i:4:p:323-357 is not listed on IDEAS

    More about this item

    Keywords

    Finance and growth; East Asian financial crisis; Credit saturation;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F30 - International Economics - - International Finance - - - General

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