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Output Responses to Shocks to Interest Rates, Inflation, and Stock Returns: Evidence from Jordan

  • Al-Sharkas, A.A.

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    This paper studies the dynamic relationship between the Jordanian output and other macroeconomics variables such as inflation, interest rate and stock returns. It employs the Vector Auto Regressive (VAR) approach method of Lee (1992) to analyze the relationship and dynamic interaction among variables. The Impulse Response Functions (IRF), and the Forecast Error Variance Decomposition (FEVD) from the VAR model are computed in order to investigate inter-relationships in the system. The results show that the response of output to shocks in stock returns is strongly positive up to the first 6 periods and after which the effect almost dies.

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    File URL: http://www.usc.es/economet/reviews/aeid436.pdf
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    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 4 (2004)
    Issue (Month): 3 ()
    Pages:

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    Handle: RePEc:eaa:aeinde:v:4:y:2004:i:1_22
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    1. Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
    2. Mukherjee, Tarun K & Naka, Atsuyuki, 1995. "Dynamic Relations between Macroeconomic Variables and the Japanese Stock Market: An Application of a Vector Error Correction Model," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 18(2), pages 223-37, Summer.
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    7. Homa, Kenneth E & Jaffee, Dwight M, 1971. "The Supply of Money and Common Stock Prices," Journal of Finance, American Finance Association, vol. 26(5), pages 1045-66, December.
    8. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    9. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
    10. Hafer, R.W. & Jansen, D.W., 1990. "The Demand For Money In The United States: Evidence From Cointegration Tests," Papers 9010, Erasmus University of Rotterdam - Institute for Economic Research.
    11. Thomas I. Palley, 1994. "Competing Views Of The Money Supply Process: Theory And Evidence," Metroeconomica, Wiley Blackwell, vol. 45(1), pages 67-88, 02.
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    13. Hamao, Yasushi, 1988. "An empirical examination of the Arbitrage Pricing Theory : Using Japanese data," Japan and the World Economy, Elsevier, vol. 1(1), pages 45-61, October.
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