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The dynamic relationship between stock market development and economic activity evidence from Peru, 1965-2011

Author

Listed:
  • Erick Lahura

    (BCRP y PUCP)

  • Marco Vega

    (BCRP y PUCP)

Abstract

We use real GDP per capita and three standard indicators of stock market development: value traded/GDP, market capitalization/GDP and turnover to study the short-run link between the stock market and economic activity in Peru. Based on annual time series data for the period 1965-2011, we estimate vector autoregressions (VARs) and identify approximate measures of stock market shocks using long-run restrictions. The results can be summarized as follows: (i) stock market indicators contribute to predict real GDP per capita growth only since the early 1990's; (ii) a stock market shock has signi cant short-run e ects on real GDP per capita; however, its contribution to output dynamics has been small.The results imply that policy actions aimed at further developing the Peruvian stock market do have a signi cant positive impact on the dynamics of economic growth. JEL Classification-JEL: E23, G1

Suggested Citation

  • Erick Lahura & Marco Vega, 2013. "The dynamic relationship between stock market development and economic activity evidence from Peru, 1965-2011," Documentos de Trabajo / Working Papers 2013-369, Departamento de Economía - Pontificia Universidad Católica del Perú.
    • Handle: RePEc:pcp:pucwps:wp00369
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    File URL: http://files.pucp.edu.pe/departamento/economia/DDD369.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jose S. Rodriguez & Lisset Montoro, 2013. "La educación superior en el Perú: situación actual y perspectivas," Documentos de Trabajo / Working Papers 2013-370, Departamento de Economía - Pontificia Universidad Católica del Perú.

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    More about this item

    Keywords

    Output growth; stock market; 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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