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Linking the missing market: The effect of bond markets on economic growth

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  • Thumrongvit, Patara
  • Kim, Yoonbai
  • Pyun, Chong Soo

Abstract

Past studies have largely focused on the positive role of banks and stock markets on economic growth. This paper adds bond markets as a third key component of the financial system. Using a panel data set of 38 countries, and applying the generalized method of moments techniques for dynamic panels, we find that (i) stock market development is positively related to economic growth; (ii) the contributing role of bank credit to economic growth diminishes as domestic bond markets develop; (iii) government bonds are positively related to economic growth, while the effects of corporate bonds change from negative to positive, as domestic financial structures expand in size and diversity.

Suggested Citation

  • Thumrongvit, Patara & Kim, Yoonbai & Pyun, Chong Soo, 2013. "Linking the missing market: The effect of bond markets on economic growth," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 529-541.
    • Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:529-541
    DOI: 10.1016/j.iref.2013.01.008
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    More about this item

    Keywords

    Financial market; Economic growth; Panel data analysis; Bond markets;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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