Financial sector ups and downs and the real sector : big hindrance, little help / Joshua Aizenman, Brian Pinto, Vladyslav Sushko.

Format:

Book

Author/Creator:

Aizenman, Joshua.

Contributor:

National Bureau of Economic Research.

Pinto, Brian.

Sushko, Vladyslav.

Series:

Policy research working papers.

Working paper series (National Bureau of Economic Research : Online) ; working paper no. 17530.

World Bank e-Library.

NBER working paper series ; working paper 17530

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

NBER working paper series vol. working paper 17530

Financial Sector ups and downs and the Real Sector

Place of Publication:

Cambridge, MA : National Bureau of Economic Research, c2011.

System Details:

Mode of access: World Wide Web.

System requirements: Adobe Acrobat Reader.

data file

Summary:

"We examine how financial expansion and contraction cycles affect the broader economy through their impact on 8 real economic sectors in a panel of 28 countries over 1960-2005, paying particular attention to large, or sharp, contractions and magnifying and mitigating factors. Overall, the construction sector is the most responsive to financial sector growth, with a number of others such as government, public utilities, and transportation also exhibiting significant sensitivity to lagged financial sector growth. Sharp fluctuations in the financial sector have asymmetric effects, with the majority of real sectors adversely affected by contractions but not helped by expansions. The adverse effects of financial contractions are transmitted almost exclusively by the financial openness channel with foreign reserves mitigating these effects with a sizeable (10 to 15 times greater) impact during sharp financial contractions. Both effects are magnified during particularly large financial contractions (with coefficients on interaction terms 2 to 3 times greater than when all contractions are considered). Consequent upon a financial contraction, the most severe real sector contractions occur in countries with high financial openness, relative predominance of construction, manufacturing, and wholesale and retail sectors, and low international reserves. Finally, we find that abrupt financial contractions are more likely to follow periods of accelerated growth, indicative of "up by the stairs, down by the elevator dynamics.""--National Bureau of Economic Research web site.

Notes:

Print version record

October 2011.

Includes bibliographical references.

Publisher Number:

10.1596/1813-9450-5860