Long-run and short-run impact of the U.S. economy on stock, bond and housing markets: An evaluation of U.S. and six major economies

This study analyzes the long-run and short-run effects of the U.S. economy as proxied by the U.S. GDP, on the stock, bond and housing markets of the U.S. and six major developed countries. It also evaluates the co-movement among the three asset classes and each country's own GDP and M1. Analysis over a 30 year period beginning in 1989:Q1 and ending in 2019:Q2, indicate that the asset classes of each country are integrated with U.S. GDP, as well the country's own GDP and M1 over the long-run although the degree of relationships differ across nations. Moreover, recursive cointegration analysis reveals that the degree of convergence has intensified over time, and the results are consistent across all countries. Short-run results indicate that U.S. GDP shocks have a more significant impact on the stock markets of each country than shocks originating from each country's own GDP and M1, which show the dominant role of the U.S. economy and its global impact. On the other hand, the U.S. GDP has a lesser influence on housing and bond markets and the results are consistent across all countries. Overall, the findings of our analyses indicate that the long-term and short-term effects of U.S. GDP vary across the three asset classes across the major economies evaluated.