Can Money Supply Predict Stock Prices?
AbstractA positive causal relation from money supply to stock prices is frequently hypothesized by some financial media and financial analysts. The basis of this assertion is an assumed negative causal relation from money supply to interest rates, and a negative causal relation from interest rates to stock prices. In this paper, we argue against a stable causal relation from money supply to stock prices. An empirical analysis, based on cointegration and Granger Causality tests, supports our argument.
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Bibliographic InfoArticle provided by Middle Tennessee State University, Business and Economic Research Center in its journal Journal for Economic Educators.
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