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Growth impact of equity market crises: A global perspective

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  • Huang, Chai Liang
  • Chang, Yu Ching

Abstract

We employ the treatment effect model to examine whether equity market crises are significantly associated with economic growth. By using a variety of indicators of equity market crises, our empirical results show that they have significantly reduced economic growth, especially in developed countries and when the stock market price dropped by 50% or more. This adverse effect was aggravated by the onset of the 2008 global financial crisis. Our empirical results also show that the most important channels of this adverse effect of equity market crises on aggregate growth are consumption and investment.

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  • Huang, Chai Liang & Chang, Yu Ching, 2022. "Growth impact of equity market crises: A global perspective," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 153-176.
    • Handle: RePEc:eee:reveco:v:78:y:2022:i:c:p:153-176
    DOI: 10.1016/j.iref.2021.11.004
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    2. Dichtl, Hubert & Drobetz, Wolfgang & Otto, Tizian, 2023. "Forecasting Stock Market Crashes via Machine Learning," Journal of Financial Stability, Elsevier, vol. 65(C).

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