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Chapter 2 Linkages between Stock Market Fluctuations and Business Cycles in Asia

In: The Evolving Role of Asia in Global Finance

Author

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  • Bertrand Candelon
  • Norbert Metiu

Abstract

This chapter sheds new light on the linkages between stock market fluctuations and business cycles in Asia. It shows that at cyclical frequencies stock markets lead business cycles by six months on average. China, Korea, and Taiwan constitute exceptions, as their real and stock market cycles are contemporaneously synchronized. The low level of maturity of these markets offers a potential explanation of this outcome. Furthermore, we find that the linkage also holds during phases of cyclical upswing and downturn, with the exception of China, where the financial market lags behind industrial production during expansions. Finally, for most of the countries (except Thailand and Malaysia), the linkage is also robust to the presence of financial crises.

Suggested Citation

  • Bertrand Candelon & Norbert Metiu, 2011. "Chapter 2 Linkages between Stock Market Fluctuations and Business Cycles in Asia," Frontiers of Economics and Globalization, in: The Evolving Role of Asia in Global Finance, pages 23-51, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:fegzzz:s1574-8715(2011)0000009007
    DOI: 10.1108/S1574-8715(2011)0000009007
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