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The Study of Correlation between Stock Market Dynamics and Real Economy

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  • Carmen Maria Angyal

    ()
    (West University Timisoara Faculty of Economics and Business Administration)

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    Abstract

    The current financial crises have determined many economists considering the source and cause of its development being the decorrelation between financial flows and real economy. In this paper, using ARIMA methodology we decompose the trend component of a stock index and apply Johansen cointegration test in order to find the measure of cointegration between capital markets’ dynamics and economic growth. Our results show that most of the indices analyzed show no cointegration with economic growth. The study highlights one of the most important factors leading to the current financial and economic crisis, namely the decoupling of the financial sector from the real economy sector.

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    File URL: http://journals.univ-danubius.ro/index.php/euroeconomica/article/view/1260/1145
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    Bibliographic Info

    Article provided by Danubius University of Galati in its journal Euroeconomica.

    Volume (Year): (2012)
    Issue (Month): 2(31) (May)
    Pages: 14-22

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    Handle: RePEc:dug:journl:y:2012:i:2:p:14-22

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    Web page: http://www.euroeconomica-danubius.ro/
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    Related research

    Keywords: trend; economic growth; cointegration;

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