| Abstract: |
This paper investigates cross-country evidence on how capital market affects
business cycle volatility. In contrast to the large and growing literature on
the impact of finance and growth, empirical work on the relationship between
finance and volatility has been relatively scarce. Theoretically, more
developed capital market should lead to lower macroeconomic volatility. The
major finding is that countries with more developed capital market have
smoother economic fluctuations. Results are generated using panel estimation
technique with panel data from 44 countries covering the years 1975 through
2004. |