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Macroeconomic Structural Changes in a Leading Emerging Market: The Effects of the Asian Financial Crisis

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  • Dohyun CHUN

    (College of Business, Korea Advanced Institute of Science and Technology, Seoul, Korea.)

  • Hoon CHO

    (College of Business, Korea Advanced Institute of Science and Technology, Seoul, Korea.)

  • Doojin RYU

    (College of Economics, Sungkyunkwan University, Jongno-gu, Seoul 03063, Republic of Korea.)

Abstract

This study investigates stock market behavior in response to money supply, financial, aggregate spending, and aggregate supply shocks within a structural vector autoregression framework. Analyzing financial and macroeconomic data from the Korean market, a globally leading emerging market, we find that each type of macroeconomic shock has a significant effect on the price level and that real stock returns react positively (negatively) to aggregate supply (spending) shocks. Cumulative impulse response analyses suggest that the Korean economy’s structure changed significantly following the Asian financial crisis. The results by industry sector indicate that, although the manufacturing and financial sectors share similar impulse response structures, the financial crisis’ effects on the two sectors differ significantly.

Suggested Citation

  • Dohyun CHUN & Hoon CHO & Doojin RYU, 2018. "Macroeconomic Structural Changes in a Leading Emerging Market: The Effects of the Asian Financial Crisis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 22-42, December.
    • Handle: RePEc:rjr:romjef:v::y:2018:i:2:p:22-42
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    Cited by:

    1. Chun, Dohyun & Cho, Hoon & Ryu, Doojin, 2020. "Economic indicators and stock market volatility in an emerging economy," Economic Systems, Elsevier, vol. 44(2).
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    3. Daehyeon PARK & Doojin RYU, 2021. "Forecasting Stock Market Dynamics using Bidirectional Long Short-Term Memory," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 22-34, June.

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    More about this item

    Keywords

    Asian financial crisis; Emerging market; Financial Economics; Macroeconomic shock; Structural VAR;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G19 - Financial Economics - - General Financial Markets - - - Other

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