Stock market, capital flow and output: some analytical and policy perspectives

Rilina Basu and Ranjanendra Narayan Nag

Macroeconomics and Finance in Emerging Market Economies, 2011, vol. 4, issue 1, 85-99

Abstract: The article will theoretically examine how financial opening up can influence the real sector under alternative exchange rate regimes. We will show that private capital flows can produce favourable macroeconomic outcomes through an adjustment in stock market valuation and wealth effect induced by a change in asset prices. What we choose for analytical purpose is an effective demand framework, which can apply to a large class of emerging market economies.

Keywords: effective demand; stock market; capital flow; Tobin's q (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1080/17520843.2010.532145

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