EconPapers    
Economics at your fingertips  
 

Causality from real stock returns to real activity: evidence of regime-dependence

Angelos Kanas and Christos Ioannidis
Additional contact information
Christos Ioannidis: University of Bath, UK, Postal: University of Bath, UK

International Journal of Finance & Economics, 2010, vol. 15, issue 2, 180-197

Abstract: We find strong evidence of regime switching in the relation between real stock prices and real activity for the UK over the period 1946-2002. Furthermore, there is evidence that the causality pattern from real stock returns to the IP growth rate varies across regimes: causality exists only in the low stock market volatility regime, while it does not exist in the high stock market volatility regime. As the latter largely refers to the period of inflation targeting in the UK, this finding uncovers the importance of monetary policy in insulating the real economy from unexpected financial market effects during periods of financial instability. Additional evidence of regime-dependence is uncovered using impulse response analysis. Finally, the US stock market is found to exercise significant regime-independent effects on the UK relation as a whole as well as on the future UK IP growth. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1002/ijfe.383 Link to full text; subscription required (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:ijf:ijfiec:v:15:y:2010:i:2:p:180-197

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing ().

 
Page updated 2020-01-11
Handle: RePEc:ijf:ijfiec:v:15:y:2010:i:2:p:180-197