Abstract
Despite the importance of second-tier stock markets in supporting SMEs (Small and Medium Enterprise) development and innovation, the dynamic impacts of second-tier stock markets development and innovation on macroeconomic indicators remain under-explored. This study aims to bridge the gap both theoretically and empirically. Accordingly, the theoretical model of Kaleckian–Post-Keynesian macroeconomics is extended and an empirical model is specified and estimated for the case of Hong Kong. A Structural Vector Error Correction (SVEC) estimation technique and impulse response function are adopted for empirical analysis. The results determine that Hong Kong’s macroeconomic indicators exhibit small but positive feedback to shocks in the second-tier market development and innovation in the short run. Specifically, various channels of growth including private investment, domestic savings, and productivity growth are found to be responsive to shocks in the second-tier market development indicators. Meanwhile, shocks to innovation indicators effectively induce responses of the following growth channels: private investment, domestic savings, productivity growth, and employment.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Marxian reserve army effect refers to a situation that higher unemployment diminishes the bargaining power of workers and therefore stimulates higher profits.
- 2.
References
Agénor, P.-R., & Neanidis, K. (2015). Innovation, public capital, and growth. Journal of Macroeconomics, 44(3), 252–275.
Aghion, P., Comin, D., Howitt, P., & Tecu, I. (2016). When does domestic savings matter for economic growth? IMF Economic Review, 64(3), 381–407.
Aghion, P., & Howitt, P. (1998). Endogenous growth theory. Cambridge, MA: Mit Press.
Ali, M., & Aamir, N. (2014). Stock market development and economic growth: Evidence from India, Pakistan, China, Malaysia and Singapore. International Journal of Economics, Finance and Management Sciences, 2(3), 220–226. https://doi.org/10.11648/j.ijefm.20140203.13.
Azam, M., Haseeb, M., Samsi, A. B., & Raji, J. O. (2016). Stock market development and economic growth: Evidence from Asia-4 countries. International Journal of Economics and Financial Issues, 6(3), 1200–1208.
Bencivenga, V. R., Smith, B. D., & Starr, R. M. (1996). Equity markets, transactions costs, and capital accumulation: An illustration. The World Bank Economic Review, 10(2), 241–265.
Blecker, R. (2002). Distribution, demand and growth in neo-Kaleckian macro-models. In Setterfiled (Ed.), The economics of demand-led growth. Cheltenham, UK: Edward Elgar.
Boubakari, A., & Jin, D. (2010). The role of stock market development in economic growth: Evidence from some Euronext countries. International Journal of Financial Research, 1(1), 14–20.
Bowles, S., & Boyer, R. (1995). Wages, aggregate demand, and employment in an open economy: An empirical investigation. In G. Epstein, H. Gintis (Eds.), Macroeconomic policy after the conservative era. Studies in investment, saving and finance. Cambridge: University Press.
Chaiechi, T. (2012). Financial development shocks and contemporaneous feedback effect on key macroeconomic indicators: A post Keynesian time series analysis. Economic Modelling, 29(2), 487–501.
Duménil, G., & Lévy, D. (1989). The real and financial determinants of stability: The law of the tendency toward increasing instability. In: W. Semmler (Ed.), Financial dynamics and business cycles: New perspectives. Armonk, New York: M.E. Sharpe.
Dutt, A. (1995). Internal finance and monopoly power in capitalist economies: A reformulation of Steindl’s growth model. Metroeconomica, 46(1), 16–34.
Erceg, C., Gust, C., & Guerrieri, L. (2005). Can long-run restrictions identify technology shocks? Journal of the European Economic Association, 3(6), 1237–1278.
Faust, J., & Leeper, E. (1997). When do long-run identifying restrictions give reliable results? Journal of Business & Economic Statistics, 15(3), 345–353.
Gospodinov, N. (2010). Inference in nearly nonstationary SVAR models with long-run identifying restrictions. Journal of Business & Economic Statistics, 28(1), 1–12.
Greenwood, J., & Jovanovic, B. (1990). Financial development, growth, and the distribution of income. The Journal of Political Economy, 98(5), 1076–1107.
Grossman, G., & Helpman, E. (1994). Endogenous innovation in the theory of growth. Journal of Economic Perspectives, 8(1), 23–44.
Hasan, I., & Tucci, C. (2010). The innovation–economic growth nexus: Global evidence. Research Policy, 39(10), 1264–1276.
Hein, E. (2004). Money, credit and the interest rate in Marx’s economic. On the similarities of Marx’s monetary analysis to Post-Keynesian economics. International Papers in Political Economy, 11(2), 1–47.
Huergo, E., & Jaumandreu, J. (2004). Firms’ age, process innovation and productivity growth. International Journal of Industrial Organization, 22(4), 541–559.
Huh, H. -S. (2005). A simple test of exogeneity for recursively structured VAR models. Applied Economics, 37(20), 2307–2313.
International Finance Corporation—IFC. (2013). Closing the credit gap for formal and informal micro, small, and medium enterprises. Retrieved from Washington D.C. http://www.ifc.org/wps/wcm/connect/4d6e6400416896c09494b79e78015671/Closing+the+Credit+Gap+Report-FinalLatest.pdf?MOD=AJPERES.
Jensen, M., & Murphy, K. (1990). Performance pay and top-management incentives. Journal of Political Economy, 98(2), 225–264.
Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica: Journal of the Econometric Society, 59(6), 1551–1580.
Johansen, S. (1995). Likelihood-based inference in cointegrated vector autoregressive models. Oxford University Press.
Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration—With applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2), 169–210.
Kalecki, M. (1968). Trend and business cycles reconsidered. The Economic Journal, 78(310), 263–276.
King, R., & Levine, R. (1993). Finance, entrepreneurship and growth. Journal of Monetary Economics, 32(3), 513–542.
Kirchhoff, B. (1994). Entrepreneurship and dynamic capitalism: The economics of business firm formation and growth. Westport: Praeger.
Lavoie, M. (1992). Foundations of post-Keynesian economic analysis: Aldershot. UK: Edward Elgar.
Levine, R. (2005). Finance and growth: Theory and evidence. Handbook of Economic Growth, 1, 865–934.
Marglin, S. (1984). Growth, distribution, and prices. Cambridge, MA: Harvard University Press.
Marglin, S., & Bhaduri, A. (1990). Profit squeeze and Keynesian theory. In S. A. Marglin & J. B. Schor (Eds.), The golden age of capitalism. Reinterpreting the postwar experience. Oxford: Clarendon Press.
Pagano, M. (1993). Financial markets and growth: An overview. European Economic Review, 37(2–3), 613–622.
Peterhoff, D., Romeo, J., & Calvey, P. (2014). Towards better capital market solutions for SME financing. Retrieved from http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/files/insights/financial-services/2014/July/FINAL3_BetterCapitalMarketMechanismsSMEs.pdf.
Pradhan, R., Arvin, M., Hall, J., & Nair, M. (2016). Innovation, financial development and economic growth in Eurozone countries. Applied Economics Letters, 23(16), 1141–1144.
Romer, P. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002–1037.
Romer, P. (1990). Endogenous technological change. Journal of Political economy, 98(5, Part 2), 71–102.
Schumpeter, J. A. (1912). The theory of economic development. Cambridge: Harvard University Press.
Sestanovic, A. (2016). SME stock exchanges—Should they have a greater role? Journal of Finance and Law, 4(1), 59–74.
Solow, R. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65–94.
Stockhammer, E., & Onaran, Ö. (2003). The effect of distribution on accumulation, capacity utilization and employment: Testing the wage-led hypothesis for Turkey. In R. Holt, S. Pressman (Eds.), Empirical work in Post Keynesian Economics. Routledge.
Wennekers, S., & Thurik, R. (1999). Linking entrepreneurship and economic growth. Small Business Economics, 13(1), 27–56.
World Federation of Exchanges. (2015). WFE Report on SME Exchanges (with inputs from the World Bank Group’s Finance and Markets Global Practice). Retrieved from https://www.world-exchanges.org/home/index.php/research/wfe-research#sr.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2020 Springer Nature Switzerland AG
About this paper
Cite this paper
Nguyen, T., Chaiechi, T., Eagle, L., Low, D. (2020). Feedback of Macroeconomic Indicators to Shocks in Second-Tier Stock Market Development and Innovation Within Kaleckian Framework: Hong Kong Case Study. In: Tsounis, N., Vlachvei, A. (eds) Advances in Cross-Section Data Methods in Applied Economic Research. ICOAE 2019. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-38253-7_35
Download citation
DOI: https://doi.org/10.1007/978-3-030-38253-7_35
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-38252-0
Online ISBN: 978-3-030-38253-7
eBook Packages: Economics and FinanceEconomics and Finance (R0)