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Money, Stock Prices and Central Banks – Cross-Country Comparisons of Cointegrated VAR Models

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Author Info

  • Ansgar Belke
  • Marcel Wiedmann

Abstract

In this paper, we analyze the long-run behavior and short-run dynamics of stock markets across some selected developed and emerging economies - namely the United States, the Euro Area, Japan, the United Kingdom, Australia, South Korea, Thailand and Brazil - in the Cointegrated Vector-Autoregressive (CVAR) framework. The main purpose is to assess empirifcally if liquidity conditions play a signi cant role for stock market developments. As an innovation, liquidity conditions enter the analysis from three angles: in the form of a broad monetary aggregate, the interbank overnight rate and net capital ows which in our case stands for the share of global liquidity that arrives in the recipient economy. A second aim is to check empirically whether central banks are able to serve as a driver of the stock market as it, for instance, seems to be the case in late 2012 and 2013 as the consequence of the foward guidance given by central banks worldwide.

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File URL: http://www.rome-net.org/RePEc/rmn/wpaper/rome-wp-2013-08.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by ROME Network in its series ROME Working Papers with number 201308.

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Length: 33 pages
Date of creation: Jul 2013
Date of revision:
Handle: RePEc:rmn:wpaper:201308

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Web page: http://www.rome-net.org

Related research

Keywords: exchange rate pass-through; Germany; cointegration; time-varying coefficient model;

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