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Stock market development and real economic activity in Peru

Author

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  • Lahura, Erick

    (Banco Central de Reserva del Perú)

  • Vega, Marco

    (Banco Central de Reserva del Perú)

Abstract

We explore the causal effect of stock market development on real economic activity in Peru. Based on the predictions of a simple growth model, we estimate vector autoregressive models and identify stock market shocks by imposing long-run restrictions in the dynamic response of real output per capita. Using annual time series data for the period 1965-2013, we find that stock market shocks have had a short-run causal effect on real GDP per capita only after 1991, a result that is consistent with standard Granger causality tests; however, the contribution of stock market shocks to output growth dynamics have been small. Thus, policy actions aimed at further developing the Peruvian stock market may have a positive impact on the dynamics of economic growth.

Suggested Citation

  • Lahura, Erick & Vega, Marco, 2014. "Stock market development and real economic activity in Peru," Working Papers 2014-022, Banco Central de Reserva del Perú.
  • Handle: RePEc:rbp:wpaper:2014-022
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    More about this item

    Keywords

    Stock market development; output growth; VAR; long-run restrictions;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • G1 - Financial Economics - - General Financial Markets

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