Stock Market Liquidity and the Macroeconomy: Evidence from Japan

 
Author/Editor: Choi, Woon Gyu ; Cook, David
 
Publication Date: January 01, 2005
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: In a liquid financial market, investors are able to sell large blocks of assets without substantially changing the price. We document a steep drop in the liquidity of the Japanese stock market in the post-bubble period and a steep rise in liquidity risk. We find that, during Japan's deflationary period, firms with more liquid balance sheets were less exposed to stock market liquidity risk, while slowly growing firms were highly exposed to liquidity shocks. Also, aggregate liquidity had macroeconomic effects on aggregate demand through its effect on money demand.
 
Series: Working Paper No. 05/6
Subject(s): Stock markets | Japan | Liquidity | Demand

Author's Keyword(s): Stock market liquidity | liquidity shocks | vector autoregression
 
English
Publication Date: January 01, 2005
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2005006 Pages: 28
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
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