Finance and Macroeconomic Volatility

Countries with more developed financial sectors, experience fewer fluctuations in real per capita output, consumption, and investment growth. But the manner in which the financial sector develops matters. The relative importance of banks in the financial system is important in explaining consumption, and investment volatility. The proportion of credit provided to the private sector, best explains volatility of consumption, and output. The authors generate their main results using fixed-effects estimates with panel data from seventy countries for the years 1956-98. Their general findings suggest that the risk management, and information processing provided by banks, maybe especially important in reducing consumption, and investment volatility. The simple availability of credit to the private sector, probably helps smooth consumption, and GDP.

Bibliographic Details

Main Authors:	Denizer, Cevdet, Iyigun, Murat F., Owen, Ann L.
Language:	English en_US
Published:	World Bank, Washington, DC 2000-11
Subjects:	ACCOUNTING, AGGREGATE OUTPUT, AGGREGATE SUPPLY, AGGREGATE SUPPLY CURVE, ANNUAL GROWTH, ANNUAL OBSERVATIONS, ASYMMETRIC INFORMATION, AVERAGE GROWTH, AVERAGE GROWTH RATE, AVERAGE LEVEL, BANKING INDUSTRY, BANKS, BUSINESS CYCLE, BUSINESS CYCLES, CAPITAL FLOWS, CAPITAL MARKET, CAPITAL MARKETS, CENTRAL BANK, CONTAGION, CORPORATE GOVERNANCE, COUNTRY CHARACTERISTICS, COUNTRY EFFECTS, COUNTRY REGRESSIONS, COUNTRY RESULTS, COUNTRY SPECIFIC, CREDIT MARKETS, CROSS COUNTRY, CROSS-COUNTRY COMPARISONS, CROSS-COUNTRY DATA, CROSS-COUNTRY REGRESSION, CROSS-SECTIONAL DATA, DATA AVAILABILITY, DATA SET, DATA SETS, DEBT, DEPENDENT VARIABLE, DEVELOPED COUNTRIES, DEVELOPMENT INDICATORS, DIVERSIFICATION, DOMESTIC CREDIT, ECONOMIC ACTIVITY, ECONOMIC DYNAMICS, ECONOMIC EQUILIBRIUM, ECONOMIC FLUCTUATIONS, ECONOMIC GROWTH, ECONOMIC LITERATURE, ECONOMIC REVIEW, ECONOMIC STUDIES, ECONOMIC THEORY, EMPIRICAL EVIDENCE, EMPIRICAL LITERATURE, EMPIRICAL RESULTS, EMPIRICAL STUDIES, EMPIRICAL WORK, ENDOGENOUS GROWTH, ERROR TERM, ESTIMATION TECHNIQUES, EXCHANGE RATE, EXOGENOUS SHOCKS, EXOGENOUS VARIABLE, EXPLANATORY POWER, EXTERNAL SHOCKS, FINANCIAL DEVELOPMENT, FINANCIAL INSTITUTIONS, FINANCIAL INTERMEDIARIES, FINANCIAL INTERMEDIATION, FINANCIAL MANAGEMENT, FINANCIAL MARKETS, FINANCIAL SECTOR, FINANCIAL SECTORS, FINANCIAL SYSTEMS, FIXED EFFECTS, FIXED EFFECTS ESTIMATION, FOREIGN EXCHANGE, GDP, GROWTH LITERATURE, GROWTH RATE, GROWTH RATES, GROWTH REGRESSIONS, HIGH INCOME COUNTRIES, IMPORTS, INCOME, INCOME GROWTH, INDEPENDENT VARIABLES, INDUSTRIALIZED COUNTRIES, INFLATION, INFLATION RATE, INFORMATION ASYMMETRIES, INTEREST RATE, INVESTMENT OPPORTUNITIES, LABOR MARKET, LIQUIDITY, LONG RUN, M2, MACROECONOMIC FACTORS, MACROECONOMIC PERFORMANCE, MACROECONOMIC VARIABLES, MARKET IMPERFECTIONS, MONETARY ECONOMICS, MONETARY POLICY, MONEY SUPPLY, NEGATIVE RELATIONSHIP, NEGATIVE SIGN, NET WORTH, OPEN ECONOMIES, OUTPUT GROWTH, OUTPUT VOLATILITY, PER CAPITA CONSUMPTION, PER CAPITA CONSUMPTION GROWTH, PER CAPITA INCOME, PER CAPITA INCOMES, POLICY CHANGES, POLICY RESEARCH, POLITICAL ECONOMY, POSITIVE COEFFICIENT, POSITIVE EFFECT, POSITIVE RELATIONSHIP, POVERTY REDUCTION, PRIVATE SECTOR, PUBLIC SECTOR, RANDOM EFFECTS, REAL GDP, REGRESSION TECHNIQUES, RELATIVE IMPORTANCE, RELATIVE SUPPLY, RESOURCE ALLOCATION, RISK MANAGEMENT, SENSITIVITY ANALYSIS, SIGNIFICANCE LEVEL, SIGNIFICANT RELATIONSHIP, SMOOTHING CONSUMPTION, STANDARD DEVIATION, TRANSACTIONS COSTS,
Online Access:	http://documents.worldbank.org/curated/en/2000/11/748668/finance-macroeconomic-volatility https://hdl.handle.net/10986/19762
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