Financial Liberalization and Stock Market Behaviour in Emerging Countries

Mnif Trabelsi Afef^1,

¹URED, FSEGS, Sfax, Tunisia

Cite this paper:
Mnif Trabelsi Afef. Financial Liberalization and Stock Market Behaviour in Emerging Countries. Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport. 2014; 2(1):8-17. doi: 10.12691/jbe-2-1-2

Abstract

In this paper, we analyze the behaviour of the stock market cycles in emerging countries in the region of Latin America (Argentina, Brazil, Chile Colombia and Mexico) and Asia (Philippines, Korea, Taiwan and Thailand) and we compare their characteristics with those of the United States between 1975 and 2005. We make a distinction between the pre and post-financial reform periods to study the effects of financial liberalization over time. We use the uni and multivariate unobserved components structural time series models. We find that the amplitude and volatility of American Latin countries have declined substantially after the date of financial liberalization to achieve less than those detected during the financial repression. The cycle’s synchronization with the United States has also grown considerably to around 70%. For the Asian countries, the positive effects of financial liberalization on the cyclical characteristics are not yet clear in medium term. The amplitude and volatility cycles of the Asian countries have been strengthened following the implementation of financial liberalization. But in recent years, there is a downward trend in the amplitude and volatility with improved synchronization of market cycles with those of the United States.

Keywords:
business cycle emerging stock market financial liberalization structural unobserved components cycle synchronisation

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