Monetary policy and dividend growth in Germany: long-run structural modelling versus bounds testing approach

Ansgar Belke and Thorsten Polleit

Applied Economics, 2006, vol. 38, issue 12, 1409-1423

Abstract: This study examines the long-run relationship between monetary policy and dividend growth in Germany. For this purpose, cointegration is tested for between both variables in the period 1974 to 2003. However, problems related to spurious regression arise from the mixed order of integration of the series used, from mutual causation between the variables and from the lack of a long-run relationship among the variables of the model. These problems are addressed by applying the bounds testing approach to cointegration in addition to a more standard long-run structural modelling approach. In principle, both procedures are capable of dealing with the controversial issue of the exogeneity of monetary policy vis-a-vis dividend growth. However, the structural modelling approach still leaves a certain degree of uncertainty about the integration properties of the interest rate and the dividend growth. Hence, one feels legitimized to refer to the bounds testing procedure and to conclude that in the longer term short-term rates drive stock returns but not vice versa.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/00036840500369100 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Monetary Policy and Dividend Growth in Germany: Long-Run Structural Modelling versus Bounds Testing Approach (2005)
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:taf:applec:v:38:y:2006:i:12:p:1409-1423

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036840500369100

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().