Japan s Stock Market Performance: Evidence from Toda-Yamamoto and Dolado-Lutkepohl Tests for Multivariate Granger Causality

Kishor K. Guru-Gharana, Matiur Rahman and Anisul M. Islam
Additional contact information
Kishor K. Guru-Gharana: Texas A & M University-Commerce, 2200 Campbell St, Commerce, TX 75428, USA
Matiur Rahman: McNeese State University, 4205 Ryan St, Lake Charles, LA 70609, USA
Anisul M. Islam: University of Houston-Downtown, One N Main St, Houston, TX 77002, USA.

International Journal of Economics and Financial Issues, 2021, vol. 11, issue 3, 107-122

Abstract: This paper empirically examines the causal linkages of Japan s stock market (proxied by Nikkei 225 index) performance with selected key macroeconomic fundamentals. Relatively recent Toda-Yamamoto and Dolado-Lutkepohl, multivariate Granger causality tests are implemented. Monthly time series data from September 1974 to February 2017 with a large sample size of 510 monthly observations covering the floating exchange rate regime were utilized. The study documents some interesting and some unexpected results. Bi-directional causality is evidenced only between the stock market and the industrial production. Somewhat counterintuitively, unidirectional causality runs from stock market to money supply. Furthermore, unidirectional causality flows from interest rate (bond yield) to stock market. Not so surprisingly, no causality is detected between the stock market and the general price level. This is also true for stock market and exchange rate. The above findings may aid Japanese policy makers to formulate appropriate financial, monetary and exchange rate management policies. Japan should give second thought on the efficacy of its over reliance on monetary policy with interest-rates targeting and should prepare itself for launching a pragmatic fiscal stimulus program.

Keywords: Stock Market; Macroeconomics Fundamentals; Granger Causality (search for similar items in EconPapers)
JEL-codes: E44 F41 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econjournals.com/index.php/ijefi/article/download/11262/pdf (application/pdf)
https://www.econjournals.com/index.php/ijefi/article/view/11262/pdf (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2021-03-12

Access Statistics for this article

International Journal of Economics and Financial Issues is currently edited by Ilhan Ozturk

More articles in International Journal of Economics and Financial Issues from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().