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Financial Market Variables Do Not Predict Real Activity

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Author Info
Thoma, Mark A
Gray, Jo Anna
Abstract

The past decade has seen an extensive empirical reassessment of the information content of financial market variables sensitive to monetary policy. Particularly provocative are recent papers suggesting that some interest rates and interest rate spreads contain more information about economic activity than monetary aggregates. This paper reviews important methodological pitfalls in these studies. The authors then show that none of the commonly employed measures of monetary policy contain incremental information useful in forecasting real economic activity. Two conclusions are possible: either monetary policy innovations have no significant real effects or they (collectively) have failed in their efforts to measure monetary policy. Copyright 1998 by Oxford University Press.

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Publisher Info
Article provided by Oxford University Press in its journal Economic Inquiry.

Volume (Year): 36 (1998)
Issue (Month): 4 (October)
Pages: 522-39
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Handle: RePEc:oup:ecinqu:v:36:y:1998:i:4:p:522-39

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  1. Feridun, M. & Adebiyi, M.A., 2006. "Forecasting Inflation in Developing Economies: The Case of Nigeria, 1986-1998," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 3(1), pages 55-84. [Downloadable!]
  2. Mark A. Hooker, 1999. "Oil and the macroeconomy revisited," Finance and Economics Discussion Series 1999-43, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  3. Phillip Rothman & Dick van Dijk & Philip Hans Franses, 2000. "A Multivariate STAR Analysis of the Relationship Between Money and Output," Working Papers 0012, East Carolina University, Department of Economics. [Downloadable!]
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  4. Ekaterini Panopoulou & Nikitas Pittis & Sarantis Kalyvitis, 2006. "Looking far in the past: Revisiting the growth-returns nexus with non-parametric tests," The Institute for International Integration Studies Discussion Paper Series iiisdp134, IIIS. [Downloadable!]
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