Animal spirits, the stock market, and the unemployment rate: Some evidence for German data

Ulrich Fritsche and Christian Pierdzioch

Economics Bulletin, 2017, vol. 37, issue 1, 204-213

Abstract: Models recently studied by Farmer (2012, 2013, 2015) predict that, due to labor-market frictions and 'animal spirits', stock-market fluctuations should Granger cause fluctuations of the unemployment rate. We performed several Granger-causality tests on more than half a century of German data to test this hypothesis. Our findings show that the stock market Granger causes unemployment in the short run and the long run when we control for a deterministic trend in the unemployment rate. Results of a frequency-domain test show that, in the short run, feedback cannot be rejected, whereas the causality clearly runs from the stock market to the unemployment rate in the medium to long run.

Keywords: Cointegration; Granger causality; frequency domain; animal spirits; stock market; unemployment rate (search for similar items in EconPapers)
JEL-codes: E2 E4 (search for similar items in EconPapers)
Date: 2017-01-26
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I1-P19.pdf (application/pdf)

Related works:
Working Paper: Animal Spirits, the Stock Market, and the Unemployment Rate: Some Evidence for German Data (2016)
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:ebl:ecbull:eb-16-00779

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().