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Breakdowns and revivals: the long-run relationship between the stock market and real economic activity in the G-7 countries

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  • Lyócsa, Štefan
  • Výrost, Tomáš
  • Baumöhl, Eduard

Abstract

Using monthly observations of industrial production and stock market indices from January 1961 to May 2012, we analyse the long-run relationship between the stock markets and real economic activity in the G-7 countries. In particular, this analysis uses the Toda and Yamamoto (1995) approach with the leveraged bootstrap methodology that was proposed by Hacker and Hatemi-J (2006). Our results indicate that although the expected long-run relationship holds for most of the G-7 countries, a break in this relationship occurred in the 1980s, followed by a subsequent revival after 2001.

Suggested Citation

  • Lyócsa, Štefan & Výrost, Tomáš & Baumöhl, Eduard, 2012. "Breakdowns and revivals: the long-run relationship between the stock market and real economic activity in the G-7 countries," MPRA Paper 43306, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:43306
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    References listed on IDEAS

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    More about this item

    Keywords

    real economic activity; stock markets; G-7; long-run relationship;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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