Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Long-Run Relationship between Inflation and Real Stock Prices: Empirical Evidence from South Africa

Contents:

Author Info

  • Riona Arjoon

    ()
    (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa)

  • Mariette Botes

    ()
    (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa)

  • Laban K. Chesang

    ()
    (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa)

  • Rangan Gupta

    ()
    (Department of Economics, University of Pretoria)

Abstract

The existing literature on the theoretical relationship between the rate of inflation and real stock prices in an economy has shown varied predictions about the long run effects of inflation on real stock prices. In this paper, we present some time series evidence on this issue using South African data, by applying the structural bivariate vector autoregressive (VAR) methodology proposed by King and Watson (1997). Our empirical results provide considerable support of the view that, in the long run real stock prices are invariant to permanent changes in the rate of inflation. The impulse responses reveal a positive real stock price response to a permanent inflation shock in the long run, indicating that any deviations in short run real stock prices will be corrected towards the long run value. It is therefore concluded that inflation does not lower the real value of stocks in South Africa, at least in the long run.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201028.

as in new window
Length: 22 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:pre:wpaper:201028

Contact details of provider:
Postal: PRETORIA, 0002
Phone: (+2712) 420 2413
Fax: (+2712) 362-5207
Web page: http://web.up.ac.za/default.asp?ipkCategoryID=677
More information through EDIRC

Related research

Keywords: Inflation; Real stock prices; Vector autoregressive (VAR) model;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. H.a. Mitchell-innes & M.j. Aziakpono & A.p. Faure, 2007. "Inflation Targeting And The Fisher Effect In South Africa: An Empirical Investigation," South African Journal of Economics, Economic Society of South Africa, vol. 75(4), pages 693-707, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Yu Hsing, 2011. "The Stock Market and Macroeconomic Variables in a BRICS Country and Policy Implications," International Journal of Economics and Financial Issues, Econjournals, vol. 1(1), pages 12-18.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pre:wpaper:201028. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rangan Gupta).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.