Ross Levine and Sara Zervos Abstract: Do well-functioning stock markets and banks promote long-run economic growth? This paper shows that stock market liquidity and banking development both positively, predict growth, capital accumulation, and productivity improvements when entered together in regressions, even after controlling for economic and political factors. The results are consistent wit...

This paper examines the role of the monetary instrument choice for local equilibrium determinacy under sticky prices and different fiscal policy regimes. Corresponding to Benhabib et al.’s (2001) results for interest rate feedback rules, the money growth rate should not rise by more than one for one with inflation when the primary surplus is raised with public debt. Under an exogenous primary s...

This paper shows that the probability of exercise of convertible bonds issued against a firm’s stock directly affects the liquidity of the stock itself. Using the ratio of absolute stock return to its dollar volume as a proxy for stock liquidity I demonstrate that there is a direct and positive relationship between conversion probability and stock liquidity while controlling for firm size, book...

This study is the first to investigate the renowned stock message board effect by controlling for both firm effects and board effects. Presently it is the most comprehensive study on how online stock discussion forums affect stock performance. More specifically, firm effects include firm size, earning growth rate, and media coverage intensity. Board effects include sentiment, number of messages...

We study how the approach grounded on non-extensive statistical physics can be applied to describe and distinguish different stages of the stock and money market development. A particular attention is given to asymmetric behavior of fat tailed distributions of positive and negative returns. A new method to measure this asymmetry is proposed. It is based on the value of the non-extensive Tsallis...

How does a surprise movement in stock market volatility affect our forecasts of future output across countries? This paper studies the time series and cross-sectional responses of output to variation in stock market volatility across 27 countries over 40 years, controlling for a number of country-specific characteristics. High levels of stock market volatility are detrimental to future output g...

market factors. A multistage model to explain the stock returns of a measures such as profitability and market share. For example, representative set of U.S. companies is developed. Monthly returns data for the strategy literature has primarily been concerned with how individual securities are obtained and the cross-sectional interdependencies organizations perceive the markets they operate in ...

JEL classification E52 This paper examines the credibility of the Federal Reserve's monetary targets using survey data on money growth forecasts to measure market expectations. The paper provides two main results. First, there is strong evidence that the monetary targets were credible over the 1978 to 1993 sample period, although credibility fell in the post-1985 period. Second, both the federa...

Numerous empirical studies have examined the relationship between macroeconomic variables and stock returns across different stock markets and time horizons by either outlining the influence of only domestic variables or a few global factors. The aim of this paper is to combine both global and domestic factors and extend this presumed relationship between stock returns and macroeconomic variabl...