اثرات جایگزینی و یا مکمل بین بانکداری و بازار سهام: شواهدی از انبساط مالی در تایوان

This study uses quarterly data from 1973 to 2007 to investigate the influence of financial institutions on economic growth in Taiwan. We find that the breakpoint obtained by Gregory and Hansen (1996) appears in the third quarter of 1982, which coincides with the period of financial openness. In addition, the substitution effect between credit and equity markets is improved following financial openness. The negative impact of volatility on real output before financial openness turned positive after financial openness, suggesting that appropriate volatility enhances Taiwan's economic growth under the circumstance of more matured stock market following financial openness. However, the beneficial influence of liquidity on real output before financial openness turned negative afterward, suggesting openness generated the undesirable side effect of excess liquidity that impeded economic growth. Our long-run results are essentially the same even if we take the role of the private bond market into account.

The literature of finance and economic growth frequently investigates associations between banking and growth (e.g., King and Levine, 1993, Levine et al., 2000, Beck et al., 2000, Christopoulos and Tsionas, 2004 and Loayza and Ranciere, 2006). Numerous studies also examine relationships between stock markets and economic growth (e.g., Atje and Jovanovic, 1993, Harris, 1997, Levine and Zervos, 1998, Arestis et al., 2001, Beck and Levine, 2004, Hondroyiannis et al., 2005, Wu et al., 2010 and Cheng et al., 2011). However, investigations of the finance–growth nexus generally ignore relationships between credit and equity markets. The post-2007 financial crisis reveals the importance of interactions between credit and equity markets on economic activity. Securitization2 is said to improve efficiency and liquidity of credit markets, but it lets banks off-load default risk in capital markets. In effect, this interaction deepens adverse selection and moral hazard in loan markets, and strengthens the connection of banks industry and capital markets.3 The recent financial crisis point out the importance of the interaction between credit and equity markets on economic activities. Therefore, models that investigate the influence of financial institutions on economic growth must include both markets. Except for the actual operation of credit and equity markets, Arestis et al. (2001) indicate that economic growth may be influenced by interaction between credit and equity markets. However, the extent of that influence depends on whether credit and equity markets are substitutes or complements, and the literature is ambiguous on that point. Arestis et al. (2001) indicate that firms reduce their needs for bank borrowing when they issue equity, suggesting that the two markets are substitutes. They argue that if credit markets are better positioned than equity markets to monitor agency problems, then expanding equity markets at the expense of credit markets may impede economic growth. Arestis et al. (2001) also suggest that rising stock market capitalization may augment banks’ non-lending businesses such as underwriting.4 If so, financial intermediation swells with stock markets as both simultaneously promote economic growth. Accordingly, a complete picture of the finance–growth nexus must feature the relationship between banking and stock markets. Generally, financial openness or liberalization can expand business volumes and enhance efficiency in the equity market and the banking system. The melioration in bank development allows banks to attract borrowers to finance through efficient services, which may lead to the substitutive relationship between the equity market and the banking sector. While a healthier and more liquate equity market can attract borrowers to finance from the equity market, this also benefits the banks’ underwriting business, which may lead to the substitutive or complementary relationship between the two markets. Deidda (2006) indicates that premature financial development offering advice financial liberalization in lower income countries may hurt their economies. Liu and Hsu (2006) indicate that Taiwan's economy did not seriously suffer from the Asian financial crisis of 1997–1998 owing to conservative financial liberalization. Accordingly, financial openness increases the uncertain relationships between banks and equity markets, which then ambiguously impacts economic growth. Therefore, the interaction between the banking and equity markets should consider a complete picture of the finance–growth nexus, especially in economies with ongoing financial openness processes. Previous time-series literature generally disregards the potential for structural breaks (e.g., liberalization of financial systems) that may shift long-run relationships (e.g., see Arestis and Demetriades, 1997, Xu, 2000, Chang and Caudill, 2005 and Hondroyiannis et al., 2005).5 The likelihood of regime shifts increase over lengthy sample periods. Therefore, a time-series analysis of financial institutions and economic growth must accommodate changes in long-run relationships before and after any break. This study investigates the finance–growth nexus by considering the relation between credit and equity markets, and incorporating possibility of a structural break in our model. We followed Boyd and Smith (1996) and Demirguc-Kunt and Maksimovic (1996) in using the relation between economic growth and the debt-to-equity ratio to convey interaction between credit and equity markets. An economy develops alongside increases (decreases) in the debt-to-equity ratio, supporting the claim that the two sources of finance are complements (substitutes). In other words, this ratio highlights the linkage between banking and stock markets within the framework of economic growth. To identify the structural breakpoint endogenously, we conducted cointegration tests developed by Gregory and Hansen (1996) to examine the long-run relationship between financial institutions and growth as well as the breakpoint. The endogenously decided breakpoint allows us to separate the full sample into two sub-samples and investigate discrete long-run relationships before and after the breakpoint. Our study focuses on the impact of financial institutions on Taiwan's economic growth. Complicated by proximity to mainland China and predominance of individual investors, Taiwan has a shallow domestic stock market characterized by high turnover and high volatility.6 The Taiwan Stock Exchange Company (TSEC) reported that 95% of transactions were generated by individual investors in 1993, and that they initiated nearly 70% of equity transactions in 2005. Therefore, the unique structure and investor characteristics of Taiwan's equity markets may augment the existing literature about the finance–growth nexus, particularly in a relatively immature market. Our empirical results show that the breakpoint obtained from Gregory and Hansen (1996) appeared in the third quarter of 1982, which coincides with the onset of financial openness. Our results also show that the substitution effect between credit and equity markets is improved following financial openness, suggesting that financial openness expands the size of capital markets, while the broader business scope of financial institutions helps undermine these two markets to struggle limited resources. Moreover, the negative relation between volatility and economic growth before openness turned positive afterward. This implies that post-openness volatility in Taiwan's stock market efficiently reflects information flows. These hence promote economic growth. Finally, the positive relation between liquidity and growth before openness become negative afterward, suggesting that financial openness bring undesirable side effect of liquidity. Our long-run results are robust even when taking into account the crucial role of the private bond market. The organization of the paper is given as follows. Section 2 discusses the variables and data used in the study. Section 3 describes our empirical methods including the unit-root tests with regime shifts developed by Zivot and Andrews (1992), the cointegration tests with regime shifts provided by Gregory and Hansen (1996), and the cointegration tests of Johansen (1988) and Johansen and Juselius (1990). The empirical results of the paper are discussed in Section 4. Finally, some concluding remarks are offered in Section 5.

This study applied quarterly data from 1973 to 2007 to investigate the impact of financial institutions on economic growth in Taiwan, with emphases on the possibility of a structural break and the link between credit and equity markets. We obtained several noteworthy results. First, the breakpoint obtained by Gregory and Hansen (1996) appears in the third quarter of 1982, which coincides with the period of financial openness. Second, the substitution effect between credit and equity markets is improved following financial openness, suggesting that financial openness help undermine these two markets to grapple with limited resources. That is, stock markets and banks provide different services, and policymakers need not afflict the former to advance the latter. Third, the negative relation between volatility and economic growth before openness turned positive after openness. This implies that under the circumstance of more mature stock market after financial openness, appropriate return volatility in the stock market efficiently reflects the effects of new information in an efficient stock market. These promote economic growth. Finally, the positive association between liquidity and economic growth before openness soured afterward, suggesting undesirable side effects of excess liquidity.