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

Erick Lahura and Marco Vega

No 2013-369, Documentos de Trabajo / Working Papers from Departamento de Economía - Pontificia Universidad Católica del Perú

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

Keywords: Output growth; stock market; VAR; long-run restrictions (search for similar items in EconPapers)
Pages: 18 pages
Date: 2013
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Citations: View citations in EconPapers (1)

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