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Stock Market Volatility and the Business Cycle

Burkhard Raunig and Johann Scharler

Monetary Policy & the Economy, 2010, issue 2, 54–63

Abstract: In this paper we provide a review of the literature on the link between stock market volatility and aggregate demand. In particular, we focus on the implications of the so-called uncertainty hypothesis according to which it is primarily the uncertainty associated with stock market fluctuations that influences aggregate demand. Empirical studies find that stock market volatility indeed feeds back into the real economy.

Keywords: uncertainty hypothesis; conditional volatility; business cycle (search for similar items in EconPapers)
JEL-codes: E44 E20 E30 (search for similar items in EconPapers)
Date: 2010
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