Credit buildups and the stock market in four East Asian economies

Jong Hun Kim and Peter Rousseau

Journal of Macroeconomics, 2012, vol. 34, issue 2, 489-503

Abstract: We examine the relationship between intermediaries, stock markets, and real activity in four East Asian crisis economies (Indonesia, Korea, Malaysia, and Thailand) using a series of comparative vector autoregressive and error correction models with quarterly data from 1995 through 2010, thus including both the financial crises of 1997–1998 and 2008–2009. Although we find generally positive effects of stock market development and liquidity on growth and investment for all four countries, expansion in traditional measures of financial development do not promote growth, and even have strongly negative effects for Indonesia and Korea. The results from these economies suggest that credit can build up to the point of “saturation,” and that a well-functioning stock market can serve as a growth-promoting outlet for funds as a financial system expands and evolves.

Keywords: Finance and growth; East Asian financial crisis; Credit saturation (search for similar items in EconPapers)
JEL-codes: E44 E50 F30 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:2:p:489-503

DOI: 10.1016/j.jmacro.2012.01.004

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