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Causal Relations among Stock Returns, Interest Rates, Real Activity, and Inflation

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Author Info
 Lee, Bong-Soo
Abstract

Using a multivariate vector-autoregression approach, this paper investigates causal relations and dynamic interactions among asset returns, real activity, and inflation in the postwar United States. Major findings are (1) stock returns appear Granger-causally prior and help explain real activity; (2) with interest rates in the vector autoregression, stock returns explain little variation in inflation, although interest rates explain a substantial fraction of the variation in inflation; and (3) inflation explains little variation in real activity. Copyright 1992 by American Finance Association.

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Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 47 (1992)
Issue (Month): 4 (September)
Pages: 1591-603
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Handle: RePEc:bla:jfinan:v:47:y:1992:i:4:p:1591-603

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  11. Patricia Fraser & Nicolaas Groenewold, 2003. "US Share Prices and Real Supply and Demand Shocks," Economics Discussion / Working Papers 03-19, The University of Western Australia, Department of Economics. [Downloadable!]
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