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- Title
Stock Prices, Output and the Monetary Regime.
- Authors
Flood, Robert; Marion, Nancy
- Abstract
Should monetary policy react to stock prices? The answer depends on whether stock prices are good predictors of future economic activity. Using long annual time-series data for the G-7 countries, data going back over 150 years for some countries, we find that stock prices do not systematically predict output growth regardless of the monetary regime in effect. We also find no evidence of a nonlinear relationship between stock prices and output except during the gold standard, when stock price booms and busts had some predictive power for output growth volatility.
- Subjects
STOCK prices; MONETARY policy; GOLD standard; FINANCIAL markets; ECONOMIC forecasting; MONEY supply; ECONOMIC indicators
- Publication
Open Economies Review, 2006, Vol 17, Issue 2, p147
- ISSN
0923-7992
- Publication type
Article
- DOI
10.1007/s11079-006-6808-3