ARE STOCK PRICES AND ECONOMIC ACTIVITY COINTEGRATED? EVIDENCE FROM THE US, 1950–2005

2006 ◽  
Vol 02 (01) ◽  
pp. 0650003 ◽  
Author(s):  
STEVEN COOK
Keyword(s):  
Economic Theory ◽  
Structural Change ◽  
Industrial Production ◽  
Stock Prices ◽  
Economic Activity ◽  
Long Span ◽  
Cointegration Tests ◽  
The Us ◽  
Asymmetric Cointegration

The potential cointegrating relationship between stock prices and economic activity suggested by financial and economic theory is examined. It is found that the commonly employed tests of Engle and Granger (1987) and Johansen (1988) fail to detect cointegration between stock prices and industrial production for a long span of US data. In recognition of factors which may result in a failure to detect a genuine cointegrating relationship, the analysis is extended to consider higher-powered cointegration tests, tests which allow for structural change in the cointegrating relationship and tests of asymmetric cointegration. However, despite considering a range of tests, no evidence of cointegration is detected. The results therefore do not support the predictions of financial and economic theory.

Growth and returns across countries

2021 ◽  
pp. 78-87
Author(s):  
Jesper Rangvid
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Stock Returns ◽  
Stock Prices ◽  
Economic Activity ◽  
Wide Margin ◽  
The Past ◽  
Long Run ◽  
The Us ◽  
Long Run Risk

This chapter examines the relation between long-run economic growth and returns across countries. Have countries that have experienced high GDP growth historically also experienced high stock returns? The chapter contains three main messages. First, there is no clear tendency that countries that have grown fast in the past are also countries that have delivered high stock returns in the past. Second, as in the US, stock prices have in many countries followed economic activity in the long run. Third, real interest rates relate to economic growth across countries in the long run.Another conclusion emerging from this chapter is that long-run stock returns exceed long-run rates of economic growth and long-run risk-free rates by a wide margin.

Assessing the Macroeconomic Effects of Quantitative Easing: Empirical Evidence from the Federal Reserve’s Experience

2019 ◽  
Vol 67 (3-4) ◽  
pp. 233-245
Author(s):  
Achille Dargaud Fofack ◽  
Ahmet Aker ◽  
Husam Rjoub ◽  
Amin Sokhanvar
Keyword(s):  
Stock Prices ◽  
Economic Activity ◽  
The United States ◽  
Quantitative Easing ◽  
Structural Vector Autoregression ◽  
Monthly Data ◽  
Svar Model ◽  
The Us ◽  
Us Dollar ◽  
Structural Vector

This article aims at assessing the effects of the Federal Reserve’s quantitative easing (QE) programmes on both economic activity and prices in the United States. Using a structural vector autoregression (SVAR) model on monthly data from January 2007 to March 2017, it is assumed that a substantial fraction of the liquidity injected under the Federal Reserve’s quantitative easing programmes was used to artificially inflate stock prices. Furthermore, QE is assumed to be a competitive devaluation programme. The findings reveal that QE helps support economic activity, while its effect on inflation is rather small and insignificant. Besides, it is also found that QE boosts stock prices but does not have a significant effect on the US dollar.

scholarly journals Inflation, Output, And Stock Prices: Evidence From Brazil

2011 ◽  
Vol 18 (1) ◽  
Author(s):  
Bahram Adrangi ◽  
Arjun Chatrath ◽  
Antonio Z. Sanvicente
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Economic Activity ◽  
Negative Relationship ◽  
The Real ◽  
Price Levels ◽  
Long Run ◽  
Inflation Rates ◽  
Cointegration Tests ◽  
Long Run Equilibrium

<p class="MsoNormal" style="text-align: justify; margin: 0in 40.5pt 0pt 0.5in;"><span style="mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Batang;">Research in economics and finance documents a puzzling negative relationship between stock returns and inflation rates in markets of industrialized economies.<span style="mso-spacerun: yes;">&nbsp; </span>The present study investigates this relationship for Brazil. We show that the negative relationship between the real stock returns and unexpected inflation persists after purging inflation of the effects of the real economic activity.<span style="mso-spacerun: yes;">&nbsp; </span>The Johansen and Juselius cointegration tests verify a long-run equilibrium between stock prices, general price levels, and the real economic activity. Furthermore, stock prices and general price levels also show a strong long-run equilibrium with the real economic activity and each other.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>The findings lend support to Fama&rsquo;s proxy hypothesis in the long-run.</span></span></span></p>

scholarly journals Stock Prices, Consumer Sentiment, And Economic Activity: Some Robust Bilateral Causality Tests For The US And The UK

2011 ◽  
Vol 7 (1) ◽  
Author(s):  
Hassan Shirvani ◽  
Barry Wilbratte
Keyword(s):  
Granger Causality ◽  
Stock Prices ◽  
Economic Activity ◽  
Structural Breaks ◽  
Consumer Sentiment ◽  
Test Procedures ◽  
The Us ◽  
Causality Tests ◽  
Granger Causality Tests ◽  
The Uk

This paper performs robust bilateral Granger causality tests for stock prices, consumer sentiment, and economic activity for the US and the UK. The robust test procedures involve the use of recently developed time series analysis of nonstationary data with possible structural breaks. Applying a battery of such tests, the paper finds the underlying data to be generally nonstationary and noncointegrated, even after allowing for possible breaks in the data, thus implying that the standard bilateral Granger causality tests are robust. The empirical results indicate the presence of unidirectional causality from stock prices to consumer sentiment for both countries. Given that stock prices drive consumer sentiment, we perform additional causality tests to determine the effect of consumer sentiment on the economy. Our finding of a unidirectional causality from consumer sentiment to the economy in both countries is consistent with a chain of causality from stock prices to consumer sentiment to the economy.

Macroeconomic Factors and Pakistani Equity Market”

2004 ◽  
Vol 43 (4II) ◽  
pp. 619-637 ◽  
Author(s):  
Muhammad Nishat ◽  
Rozina Shaheen
Keyword(s):  
Stock Market ◽  
Industrial Production ◽  
Stock Prices ◽  
Stock Price ◽  
Consumer Price Index ◽  
Reverse Causality ◽  
Macroeconomic Factors ◽  
Macroeconomic Variables ◽  
Equilibrium Relationships

This paper analyzes long-term equilibrium relationships between a group of macroeconomic variables and the Karachi Stock Exchange Index. The macroeconomic variables are represented by the industrial production index, the consumer price index, M1, and the value of an investment earning the money market rate. We employ a vector error correction model to explore such relationships during 1973:1 to 2004:4. We found that these five variables are cointegrated and two long-term equilibrium relationships exist among these variables. Our results indicated a "causal" relationship between the stock market and the economy. Analysis of our results indicates that industrial production is the largest positive determinant of Pakistani stock prices, while inflation is the largest negative determinant of stock prices in Pakistan. We found that while macroeconomic variables Granger-caused stock price movements, the reverse causality was observed in case of industrial production and stock prices. Furthermore, we found that statistically significant lag lengths between fluctuations in the stock market and changes in the real economy are relatively short.

Study of Structural Change in Paddy Agriculture under Reorganization of Direct Payment Policy

Impact ◽  
2020 ◽  
Vol 2020 (6) ◽  
pp. 55-57
Author(s):  
Kunio Nishikawa
Keyword(s):  
Structural Change ◽  
Rice Production ◽  
Direct Payment ◽  
Japan Society ◽  
Payment Policy ◽  
The Us ◽  
Shed Light

Rice has long been an integral part of Japan's culture and economy, as well as an important commodity in Japan-US relations, but farmers in Japan are concerned that trouble is afoot due to competition from countries such as the US, where rice production is more competitive, as well as reorganization of direct payment policy. The question is, how can rice production in Japan remain competitive amidst such competition? One researcher is seeking to shed light on the situation and explore how paddy agriculture in Japan can potentially flourish. Dr Kunio Nishikawa is based at Ibaraki University, Japan, whose Japan Society for the Promotion of Science (JSPS)-funded work is exploring the discrepancy in crop output in the US versus Japan, and seeking to find new ways to boost Japan's agriculture.

The Nexus Between Johannesburg Stock Exchange and the United States Unemployment Rate Announcement: An Impulse Response Analysis

2018 ◽  
Vol 10 (3(J)) ◽  
pp. 160-168
Author(s):  
Misheck Mutize ◽  
Victor Virimai Mugobo
Keyword(s):  
United States ◽  
South African ◽  
Impulse Response ◽  
Unemployment Rate ◽  
Stock Prices ◽  
Stock Exchange ◽  
The United States ◽  
Response Analysis ◽  
Johannesburg Stock Exchange ◽  
The Us

The study explores the relationship between the unemployment rate in the United States and South Africa’s stock prices from the beginning of 2013 to the last day 2017. The objective of this paper is to examine the impact of the US unemployment rate announcement on the South African financial market. Results of Impulse Response analysis show that there is a very minimal impact from the US unemployment announcement to South Africa’s stock prices which disappears within two days of the announcement. In addition, the Johannesburg stock exchange index marginally responds to own shocks, which marginally fades away within two days. These findings imply that the changes in the US employment policies have a direct ripple effect on the South African macroeconomic environment, its investing public sentiments and corporate confidence on the future prospects of businesses.

scholarly journals Stock prices and economic activity nexus in OECD countries: new evidence from an asymmetric panel Granger causality test in the frequency domain

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Veli Yilanci ◽  
Onder Ozgur ◽  
Muhammed Sehid Gorus
Keyword(s):  
Frequency Domain ◽  
Granger Causality ◽  
Stock Prices ◽  
Economic Activity ◽  
Stock Price ◽  
Predictive Power ◽  
Oecd Countries ◽  
Causality Test ◽  
Asymmetric Shocks ◽  
Panel Granger Causality

AbstractThis study investigates the stock price–economic activity nexus in 12 member countries of the Organization for Economic Cooperation and Development (OECD) by employing monthly data over the period 1981:1–2018:3. For this purpose, the study uses Granger causality in the frequency domain in the panel setting by decomposing the symmetric and asymmetric fluctuations. This methodology determines whether the predictive power of interested variables is concentrated on quickly, moderately, or slowly fluctuating components. Our findings show that the stock prices have predictive power for future long-term economic activity in the panel setting. However, economic activity has more reliable information for stock prices for negative components. Additionally, empirical findings for asymmetric shocks are not fully consistent with those of symmetric ones. Besides, the country-specific results provide different causal linkages across members and frequencies. These findings may provide valuable information for policymakers to design proper and effective policies in OECD countries regarding the stock market and economic activity nexus.

scholarly journals A global perspective on macroprudential policy interaction with systemic risk, real economic activity, and monetary intervention

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Mikhail I. Stolbov ◽  
Maria A. Shchepeleva ◽  
Alexander M. Karminsky
Keyword(s):  
Systemic Risk ◽  
Industrial Production ◽  
Economic Activity ◽  
Global Financial Crisis ◽  
Convincing Evidence ◽  
Global Perspective ◽  
Growth Effect ◽  
Macroprudential Policy ◽  
Study Results ◽  
Systemic Stress

AbstractThe study empirically assesses how macroprudential policy interacts with systemic risk, industrial production, and monetary intervention on a global level from January 2006 to December 2018. We adopt the aggregate proxies of these variables, capturing their global effects, and use a novel econometric technique, namely, smooth local projections. The study finds that global macroprudential policy leads the monetary policy, exhibiting a countercyclical pattern concerning industrial production. The latter has an inverse bidirectional linkage with systemic risk. Thus, an ex-ante tight macroprudential policy can indirectly mitigate global systemic risk through its pro-growth effect on industrial production, although no convincing evidence exists for the direct impact of a macroprudential intervention on systemic risk. The study results endure several extensions and a robustness check, which builds on alternative measures of global systemic stress and real economic activity, thereby legitimizing the increased importance attached to the macroprudential policy since the 2007–2009 global financial crisis.

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