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The Impact of Capital Market Players’ Exit, Voice and Loyalty on Economic Growth

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  • Szabó, Zsolt

Abstract

In analyses of the global money and capital markets, economic discourse is mostly focussed on the movement and flow of capital, giving less emphasis to its role in influencing the formation of institutional frameworks as well as national and interna-tional rules, particularly in terms of the impact on economic growth. Based on the concept of exit, voice and loyalty developed by albert O. Hirschman, this paper examines the effect of capital movement and investors’ voice on economic growth, making use of both macroeconomic tools and linear regression based on the data of European countries and Post-Soviet states. Our results indi-cate that the de facto exit of capital has a negative effect on economic growth, while the de jure exit of capital to the shadow econ-omy and investors’ voice result in a higher growth rate.

Suggested Citation

  • Szabó, Zsolt, 2012. "The Impact of Capital Market Players’ Exit, Voice and Loyalty on Economic Growth," Public Finance Quarterly, Corvinus University of Budapest, vol. 57(4), pages 474-489.
    • Handle: RePEc:pfq:journl:v:57:y:2012:i:4:p:474-489
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    File URL: https://unipub.lib.uni-corvinus.hu/8973/
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    More about this item

    Keywords

    exit; voice; capital movement; credit rating; economic growth;
    All these keywords.

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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