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The Effects of Financial Instability on Real Output Growth

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주제분류경제학

초록

We investigate the dynamic relationship between financial uncertainty and real output growth using the time series data for Korea and U.S. To measure the financial uncertainty, we use a financial stress index (FSI) as a proxy variable, following Illing and Liu (2003, 2006). After constructing the FSI, a structural VAR (Vector Autoregressive) model is applied to examine the relationship between financial uncertainty and real economy. Our result confirms that the financial uncertainty significantly decreases the growth in real output in each country. Also, the financial instability affects the real output in different country as the FSI in U.S decreases the real output growth in Korea, which would be due to the deepening of global financial market synchronization.

Abstract

We investigate the dynamic relationship between financial uncertainty and real output growth using the time series data for Korea and U.S. To measure the financial uncertainty, we use a financial stress index (FSI) as a proxy variable, following Illing and Liu (2003, 2006). After constructing the FSI, a structural VAR (Vector Autoregressive) model is applied to examine the relationship between financial uncertainty and real economy. Our result confirms that the financial uncertainty significantly decreases the growth in real output in each country. Also, the financial instability affects the real output in different country as the FSI in U.S decreases the real output growth in Korea, which would be due to the deepening of global financial market synchronization.

참고문헌 (46)

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