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The effects of financial instability on real output growth

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behavior in terms of demand for a given fund. In particular, most of the participants in the financial market tended to respond similarly against a (global) financial shock, in order to secure the value of their own assets. This relationship provides some useful inferences regarding causation, of which financial uncertainty affects the real output. The surge in volatility resulting from the sudden change in the price of a financial asset magnifies this market uncertainty. An increase in financial uncertainty in a specific financial market tends to spread to other areas including interest rates, stocks, and foreign exchange markets. Therefore, as negative expectations prevail in major financial markets, most investors and consumers have made changes to their economic choices. Investors involved in the market would change their investment behavior to a more conservative or cautious one(Demers, 1991). Therefore, under the circumstances, an investor is likely to show a relatively poor response to a positive demand shock, compared to a negative shock(Bloom, Bond and Reenen, 2007).2) Also,
1) The list of all references will be provided by request to jwkim@kiet.re.kr
consumers tend to reduce or delay their expenditures.3) After all, financial uncertainty is likely to affect industrial production(Erdem, Arslan, and Erdem, 2005). If that particular economy is sufficiently large enough, the financial uncertainty could easily spread with


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Title The effects of financial instability on real output growth
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Material Type Reports
Author(English)

Kim, JinWoong

Publisher

[Seoul]:Korea Institute for Industrial Economics & Trade

Date 2010
Journal Title; Vol./Issue KIET Industrial Economic Review(Current issues):vol. 15(no. 1)
Pages 14
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Holding KIET; KDI School

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