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

Dohyun Chun, Hoon Cho and Doojin Ryu ()
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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.

Journal for Economic Forecasting, 2018, issue 2, 22-42

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.

Keywords: Asian financial crisis; Emerging market; Financial Economics; Macroeconomic shock; Structural VAR (search for similar items in EconPapers)
JEL-codes: E44 E49 E52 G15 G19 (search for similar items in EconPapers)
Date: 2018
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