Interactions between Business Cycles, stock Market Cycles and Interest Rates: the Stylised Facts

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Interactions between Business Cycles, stock Market Cycles and Interest Rates: the Stylised Facts

Author Info

Avouyi-Dovi, S.
Matheron, J.

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Julien Matheron

Abstract

In this paper, we study the co-movements between stock market indices and real economic activity over the business cycle in France, Germany, Italy, the United Kingdom and the United States, using two complementary approaches in our analysis. First, we identify the turning points in real economy indicators and stock market indices and determine the extent to which these series co-move. Second, we calculate the correlations between the cyclical components of real economy indicators and excess returns, on the one hand, and the correlations between the structural components and these indicators, on the other. We then analyse the co-movements between three-month interest rates and the cyclical and structural components of the real economy and stock market indices.

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Paper provided by Banque de France in its series Documents de Travail with number 121.

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Length: 36 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:bfr:banfra:121

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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James B. Bullard & Eric Schaling, 2002. "Why the Fed should ignore the stock market," Review, Federal Reserve Bank of St. Louis, issue Mar., pages 35-42. [Downloadable!]
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Other versions:
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Other versions:
- Croux, Christophe & Forni, Mario & Reichlin, Lucrezia, 1999. "A Measure of Comovement for Economic Variables: Theory and Empirics," CEPR Discussion Papers 2339, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

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