Stock Market Liquidity and The Business Cycle: An Empirical Study Of Asia-Pacific Countries

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This paper investigates the relationship between stock market liquidity (national and global which includes US and Japan) and macroeconomic variables such as GDP, investment, unemployment and consumption for a mix of developed and developing Asia-Pacific countries namely Australia, Hong-Kong, Korea, Philippines, Malaysia and Singapore following US evidence by Naes et al (2011) and Galariotis & Giouvris (2015) for G7. Our regressions show that global liquidity predicts macro economic variables better than national liquidity. Granger causality tests show that there is a 2 way relationship between national liquidity and macroeconomic variables in contrast to the US. We also find no causality between macro variables and global liquidity in developed markets and one way causality from macro variables to global liquidity in developing markets. Also contrary to the US where small firm liquidity predicts macroeconomic variables we find no small firm liquidity effect which is also supported by causality tests. National large firm liquidity appears to have a stronger effect.
Original languageEnglish
Journaljournal of economics and business research
Publication statusAccepted/In press - 12 Sept 2018


  • Market Liquidity; Real Economy; Economic Indicators; Granger Causality, Panel Data, Dumitrescu Hurlin

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