Publication:
Financial Sector Ups and Downs and the Real Sector : Big Hindrance, Little Help

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dc.contributor.authorAizenman, Joshua
dc.contributor.authorPinto, Brian
dc.contributor.authorSushko, Vladyslav
dc.date.accessioned2012-03-19T18:05:48Z
dc.date.available2012-03-19T18:05:48Z
dc.date.issued2011-10-01
dc.description.abstractThis paper examines how financial expansion and contraction cycles affect the broader economy through their impact on eight real economic sectors in a panel of 28 countries over 1960-2005, paying particular attention to large, or sharp, contractions and magnifying and mitigating factors. Overall, the construction sector is the most responsive to financial sector growth, with a number of others -- such as government, public utilities, and transportation -- also exhibiting significant sensitivity to lagged financial sector growth. Sharp fluctuations in the financial sector have asymmetric effects, with the majority of real sectors adversely affected by contractions but not helped by expansions. The adverse effects of financial contractions are transmitted almost exclusively by the financial openness channel with foreign reserves mitigating these effects with a sizeable (10 to 15 times greater) impact during sharp financial contractions. Both effects are magnified during particularly large financial contractions (with coefficients on interaction terms two to three times greater than when all contractions are considered). Consequent upon a financial contraction, the most severe real sector contractions occur in countries with high financial openness; relative predominance of construction, manufacturing, and wholesale and retail sectors; and low international reserves. Finally, the analysis finds that abrupt financial contractions are more likely to follow periods of accelerated growth, indicative of "up by the stairs, down by the elevator dynamics."en
dc.identifierhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111026090001
dc.identifier.doi10.1596/1813-9450-5860
dc.identifier.urihttps://hdl.handle.net/10986/3626
dc.languageEnglish
dc.relation.ispartofseriesPolicy Research working paper ; no. WPS 5860
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectABSOLUTE VALUE
dc.subjectACCOUNTING
dc.subjectADVANCED ECONOMIES
dc.subjectADVERSE EFFECT
dc.subjectADVERSE EFFECTS
dc.subjectADVERSE IMPACT
dc.subjectAGGREGATE LEVEL
dc.subjectAGRICULTURAL SECTOR
dc.subjectAGRICULTURE
dc.subjectANNUAL GROWTH
dc.subjectANNUAL GROWTH RATE
dc.subjectAVERAGE GROWTH
dc.subjectAVERAGE GROWTH RATE
dc.subjectAVERAGE LEVEL
dc.subjectBALANCE SHEET
dc.subjectBANK POLICY
dc.subjectBANKING CRISES
dc.subjectBANKING CRISIS
dc.subjectBENCHMARK
dc.subjectBOOM-BUST CYCLES
dc.subjectBUFFER
dc.subjectBUSINESS CYCLE
dc.subjectBUSINESS CYCLES
dc.subjectCAPITAL ACCOUNT
dc.subjectCAPITAL ACCOUNT OPENNESS
dc.subjectCAPITAL FLIGHT
dc.subjectCAPITAL FLOWS
dc.subjectCAPITAL INFLOWS
dc.subjectCAPITAL MOBILITY
dc.subjectCOLLATERAL
dc.subjectCOMPARATIVE ADVANTAGE
dc.subjectCONTROL VARIABLE
dc.subjectCONVERGENCE HYPOTHESIS
dc.subjectCORRELATION COEFFICIENTS
dc.subjectCOUNTRY LEVEL
dc.subjectCREDIT MARKETS
dc.subjectCROSS-BORDER CAPITAL
dc.subjectCUMULATIVE DISTRIBUTION
dc.subjectCUMULATIVE DISTRIBUTION FUNCTION
dc.subjectCURRENCY
dc.subjectCURRENCY CRISES
dc.subjectCURRENCY CRISIS
dc.subjectDEBT
dc.subjectDEFICITS
dc.subjectDEFLATION
dc.subjectDEPENDENT VARIABLE
dc.subjectDEVELOPED COUNTRIES
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectDEVELOPMENT INDICATORS
dc.subjectDEVELOPMENT POLICY
dc.subjectDIMINISHING RETURNS
dc.subjectDOMESTIC DEMAND
dc.subjectDUMMY VARIABLES
dc.subjectECONOMIC CONTRACTIONS
dc.subjectECONOMIC CRISIS
dc.subjectECONOMIC DOWNTURNS
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC IMPACT
dc.subjectECONOMIC LITERATURE
dc.subjectECONOMIC SECTORS
dc.subjectECONOMICS LETTERS
dc.subjectEMERGING MARKET
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectEMERGING MARKETS
dc.subjectEMPIRICAL ESTIMATES
dc.subjectERROR TERM
dc.subjectESTIMATION RESULTS
dc.subjectEXOGENOUS VARIABLES
dc.subjectEXPLANATORY VARIABLES
dc.subjectEXPORTS
dc.subjectEXPOSURE
dc.subjectEXTERNAL FINANCE
dc.subjectEXTERNAL FINANCING
dc.subjectFINANCIAL ASSETS
dc.subjectFINANCIAL CAPITAL
dc.subjectFINANCIAL COLLATERAL
dc.subjectFINANCIAL CRISIS
dc.subjectFINANCIAL DEPTH
dc.subjectFINANCIAL DEVELOPMENT
dc.subjectFINANCIAL INTEGRATION
dc.subjectFINANCIAL INTERMEDIATION
dc.subjectFINANCIAL MANAGEMENT
dc.subjectFINANCIAL OPENNESS
dc.subjectFINANCIAL SECTOR
dc.subjectFINANCIAL SECTOR DEVELOPMENT
dc.subjectFINANCIAL SHOCK
dc.subjectFINANCIAL SHOCKS
dc.subjectFINANCIAL STABILITY
dc.subjectFINANCIAL STRESS
dc.subjectFINANCIAL STUDIES
dc.subjectFINANCIAL SYSTEM
dc.subjectFINANCIAL SYSTEMS
dc.subjectFINANCIALLY OPEN ECONOMIES
dc.subjectFIXED EFFECTS
dc.subjectFOREIGN ASSETS
dc.subjectFOREIGN CAPITAL
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN EXCHANGE MARKETS
dc.subjectFOREIGN EXCHANGE RESERVE
dc.subjectFOREIGN EXCHANGE RESERVES
dc.subjectFOREIGN RESERVES
dc.subjectFUTURE RESEARCH
dc.subjectGDP
dc.subjectGDP PER CAPITA
dc.subjectGLOBAL CURRENCY
dc.subjectGLOBALIZATION
dc.subjectGOVERNANCE INDICATORS
dc.subjectGOVERNMENT EXPENDITURES
dc.subjectGOVERNMENT SPENDING
dc.subjectGROWTH RATE
dc.subjectGROWTH RATES
dc.subjectGROWTH THEORY
dc.subjectHOLDING
dc.subjectIMPORTS
dc.subjectINCOME
dc.subjectINFLATION
dc.subjectINFLATION RATES
dc.subjectINSURANCE
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL ECONOMICS
dc.subjectINTERNATIONAL RESERVES
dc.subjectINVESTMENT PROJECTS
dc.subjectLAGGED GROWTH
dc.subjectLAGGED VALUE
dc.subjectLIBERALIZATION
dc.subjectLIQUIDITY
dc.subjectLIQUIDITY CRUNCH
dc.subjectLONG-RUN GROWTH
dc.subjectMACROECONOMICS
dc.subjectMARGINAL EFFECT
dc.subjectMARGINAL RETURNS
dc.subjectMARKET LIQUIDITY
dc.subjectMARKET VALUES
dc.subjectMEAN GROWTH
dc.subjectMONETARY FUND
dc.subjectMORAL HAZARD
dc.subjectMORTGAGE
dc.subjectMORTGAGE LOANS
dc.subjectNEGATIVE EFFECT
dc.subjectNEGATIVE IMPACT
dc.subjectNEOCLASSICAL GROWTH MODEL
dc.subjectNORMAL DISTRIBUTION
dc.subjectNULL HYPOTHESIS
dc.subjectOPEN ECONOMIES
dc.subjectOUTPUT
dc.subjectOUTPUT COLLAPSES
dc.subjectOUTPUT LOSS
dc.subjectPANEL REGRESSIONS
dc.subjectPOLICY OPTIONS
dc.subjectPOLICY RESEARCH
dc.subjectPOLITICAL STABILITY
dc.subjectPOLITICAL TURMOIL
dc.subjectPOVERTY REDUCTION
dc.subjectPRIVATE CAPITAL
dc.subjectPRIVATE CAPITAL FLOW
dc.subjectPRIVATE CAPITAL FLOWS
dc.subjectPRIVATE INVESTMENT
dc.subjectPRODUCTIVITY GROWTH
dc.subjectPUBLIC GOOD
dc.subjectPUBLIC INVESTMENT
dc.subjectPUBLIC UTILITIES
dc.subjectRAPID EXPANSION
dc.subjectREAL ESTATE
dc.subjectREAL GDP
dc.subjectREAL GROWTH RATE
dc.subjectREAL INTEREST
dc.subjectREAL INTEREST RATE
dc.subjectREAL INTEREST RATES
dc.subjectRECESSION
dc.subjectREGRESSION ANALYSIS
dc.subjectREGULATORY REFORM
dc.subjectRELATIVE WEIGHTS
dc.subjectRESERVE ACCUMULATION
dc.subjectRESERVE CURRENCY
dc.subjectRESERVE HOLDINGS
dc.subjectROBUSTNESS CHECK
dc.subjectRULE OF LAW
dc.subjectSERIAL CORRELATION
dc.subjectSOCIAL COSTS
dc.subjectSTABLE ECONOMIC GROWTH
dc.subjectSTATISTICAL ANALYSIS
dc.subjectSTRUCTURAL BREAK
dc.subjectSTRUCTURAL CHANGE
dc.subjectTRADE OPENNESS
dc.subjectVALUE ADDED
dc.subjectWEALTH
dc.subjectWORLD DEVELOPMENT INDICATORS
dc.titleFinancial Sector Ups and Downs and the Real Sector : Big Hindrance, Little Helpen
dspace.entity.typePublication
okr.crossref.titleFinancial Sector ups and downs and the Real Sector: Big Hindrance, Little Help
okr.date.disclosure2011-10-01
okr.date.doiregistration2025-04-10T11:19:48.357404Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111026090001
okr.globalpracticePoverty
okr.guid276851468153853996
okr.identifier.doi10.1596/1813-9450-5860
okr.identifier.externaldocumentum000158349_20111026090001
okr.identifier.internaldocumentum15366543
okr.identifier.reportWPS5860
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/10/26/000158349_20111026090001/Rendered/PDF/WPS5860.pdfen
okr.region.administrativeThe World Region
okr.region.administrativeThe World Region
okr.topicPoverty Reduction::Achieving Shared Growth
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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