The Dynamic Interaction between Equity Prices and Supply Shocks

Jakob Madsen

No 03-12, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: This paper develops a theory of medium term share price movements under slow adjustment in the labour market relative to the share market and perfect foresight in the share market. The model seeks to explain the slow movements in real share prices that have been observed in the OECD countries over the past 130 years. Using 130 years of data for the OECD countries, the empirical evidence indicates that movements in factor shares are crucial determinants of medium-term movements in share prices.

Keywords: share prices; supply shocks; rational expectations (search for similar items in EconPapers)
JEL-codes: E31 E43 G12 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2003-09
New Economics Papers: this item is included in nep-mac and nep-rmg
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