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Exploring the finance-real economy link in U.S.: Empirical evidence from Panel Unit Root and Cointegration Analysis

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  • Niang, Abdou-Aziz
  • Diagne, Abdoulaye
  • Pichery, Marie-Claude

Abstract

The aim of this paper is to analyze the relationships between common shocks affecting the real economy and those underlying co-fluctuations in U.S. financial markets. In order to do this, we test for links between these common factors and also use the econometric theory of nonstationary panel data to estimate the relationships. The estimates prove the existence of significant relationships between financial and macroeconomic factors. It is also shown that there are forces pulling U.S. financial markets to move with the real economy, as seen through nearly instantaneous adjustment to a new equilibrium.

Suggested Citation

  • Niang, Abdou-Aziz & Diagne, Abdoulaye & Pichery, Marie-Claude, 2010. "Exploring the finance-real economy link in U.S.: Empirical evidence from Panel Unit Root and Cointegration Analysis," MPRA Paper 23531, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:23531
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    References listed on IDEAS

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    More about this item

    Keywords

    PANIC analysis; Panel Data; Common factors; Financial Crises; U.S;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • G01 - Financial Economics - - General - - - Financial Crises

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