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CONNECTION OF EUROPEAN ECONOMIC GROWTH WITH THE DYNAMICS OF VOLATILITY OF STOCK MARKET RETURNS

Adrian Cantemir Calin

Studii Financiare (Financial Studies), 2015, vol. 19, issue 1, 53-66

Abstract: The connections of macroeconomic growth and the financial markets are vastly studied in Europe mostly from the banking perspective. The impact of the capital markets on the economic development and the increased integration of all financial markets constitute an important element in the study of macroeconomic growth. The objective of this paper is to provide an analysis of the possible connections of the volatilities of stock market indexes computed with a GARCH model and the macroeconomic growth for a series of ten European countries. The problem of different frequencies – daily for the stock indexes and quarterly for the GDP growth – is solved by the use of the MIDAS methodology. We found connections of the dynamics of volatilities and main global events as well as the dependence of growth on these volatilities for some periods and some European countries.

Keywords: volatility; stock markets; MIDAS methodology (search for similar items in EconPapers)
JEL-codes: G15 G17 (search for similar items in EconPapers)
Date: 2015
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