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An empirical investigation among real, monetary and financial variables

Author

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  • Malliaris, A. G.
  • Urrutia, Jorge L.

Abstract

AbstractThis paper attempts to make an empirical contribution to the literature on the relationships among real, monetary and financial variables of the economy. Using the methodology of Granger's causality tests, our results indicate that: (i) Money Supply and S&P 500 exhibit contemporaneous causality; (ii) Money Supply seems to lead the S&P 500 Index and, (iii) the S&P 500 Index seems to lead the Industrial Production Index. Our findings tend to confirm the important role played by Money Supply in the economy and the popular hypothesis that stock return fluctuations are a leading indicator of future real economic activity. However, our results also show that the causal relationships among these three economic variables are not as statistically significant as the economic and financial literature suggests.
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Suggested Citation

  • Malliaris, A. G. & Urrutia, Jorge L., 1991. "An empirical investigation among real, monetary and financial variables," Economics Letters, Elsevier, vol. 37(2), pages 151-158, October.
  • Handle: RePEc:eee:ecolet:v:37:y:1991:i:2:p:151-158
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    Cited by:

    1. Nikolaos Mylonidis, 2003. "Financial variables as leading indicators in Greece," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 9(4), pages 268-278, November.
    2. Sirucek, Martin, 2012. "Macroeconomic variables and stock market: US review," MPRA Paper 39094, University Library of Munich, Germany.
    3. Rodriguez, Rosa & Restoy, Fernando & Pena, J. Ignacio, 2002. "Can output explain the predictability and volatility of stock returns?," Journal of International Money and Finance, Elsevier, vol. 21(2), pages 163-182, April.
    4. Iqbal, Javed & Nadeem, Khurram, 2006. "Exploring the causal relationship among social, real, monetary and infrastructure development in Pakistan," MPRA Paper 3267, University Library of Munich, Germany.
    5. Širůček, Martin, 2015. "Kauzalní vztah peněžní nabídky a amerického akciového trhu
      [Money supply and US stock market causality]
      ," MPRA Paper 66357, University Library of Munich, Germany, revised 30 Aug 2015.
    6. repec:kap:iaecre:v:9:y:2003:i:4:p:268-278 is not listed on IDEAS
    7. Sirucek, Martin, 2012. "The impact of money supply on stock prices and stock bubbles," MPRA Paper 40919, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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