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- Title
Dynamic Interactions among the Stock Market, Federal Funds Rate, Inflation, and Economic Activity.
- Authors
Laopodis, Nikiforos T.
- Abstract
This paper examines the dynamic interactions among the equity market, economic activity, inflation, and monetary policy under three monetary policy regimes using bivariate and multivariate vector autoregressive cointegrating specifications. The bivariate results for the real stock returns-inflation pair weakly support a negative correlation in the 1970s and 1980s. While the bivariate findings suggest a weak, negative relationship between real returns and the federal funds in the 1970s and 1980s, the multivariate findings strongly support short-term linkages in the 1970s. There appears to be no consistent dynamic relationship between monetary policy and stock prices in that the relationship differs across monetary regimes.
- Subjects
FINANCIAL research; MONETARY policy; STOCK exchanges; PRICE inflation; ECONOMIC activity; COINTEGRATION
- Publication
Financial Review, 2006, Vol 41, Issue 4, p513
- ISSN
0732-8516
- Publication type
Article
- DOI
10.1111/j.1540-6288.2006.00155.x