The Dynamic Interaction between Equity Prices and Supply Shocks
AbstractThis paper develops a theory of medium term share price movements under slow adjustment in the labour market relative to the share market and perfect foresight in the share market. The model seeks to explain the slow movements in real share prices that have been observed in the OECD countries over the past 130 years. Using 130 years of data for the OECD countries, the empirical evidence indicates that movements in factor shares are crucial determinants of medium-term movements in share prices.
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Bibliographic InfoPaper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 03-12.
Length: 21 pages
Date of creation: Sep 2003
Date of revision:
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share prices; supply shocks; rational expectations;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-09-08 (All new papers)
- NEP-MAC-2003-09-08 (Macroeconomics)
- NEP-RMG-2003-09-08 (Risk Management)
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