Stock Prices and Economic Fluctuations: A Markov Switching Structural Vector Autoregressive Analysis
AbstractThe role of expectations for economic fluctuations has received considerable attention in recent business cycle analysis. We exploit Markov regime switching models to identify shocks in cointegrated structural vector autoregressions and investigate different identification schemes for bivariate systems comprising U.S. stock prices and total factor productivity. The former variable is viewed as re°ecting expectations of economic agents about future productivity. It is found that some previously used identification schemes can be rejected in our model setup. The results crucially depend on the measure used for total factor productivity.
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Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2008/29.
Date of creation: 2008
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Cointegration; Markov regime switching model; vector error correction model; structural vector autoregression; mixed normal distribution;
Other versions of this item:
- Markku Lanne & Helmut Luetkepohl, 2008. "Stock Prices and Economic Fluctuations:A Markov Switching Structural VectorAutoregressive Analysis," CESifo Working Paper Series 2407, CESifo Group Munich.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-17 (All new papers)
- NEP-BEC-2009-01-17 (Business Economics)
- NEP-CBA-2009-01-17 (Central Banking)
- NEP-ECM-2009-01-17 (Econometrics)
- NEP-ETS-2009-01-17 (Econometric Time Series)
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