Breakdowns and revivals: the long-run relationship between the stock market and real economic activity in the G-7 countries

Štefan Lyócsa, Tomáš Výrost and Eduard Baumohl

MPRA Paper from University Library of Munich, Germany

Abstract: Using monthly observations of industrial production and stock market indices from January 1961 to May 2012, we analyse the long-run relationship between the stock markets and real economic activity in the G-7 countries. In particular, this analysis uses the Toda and Yamamoto (1995) approach with the leveraged bootstrap methodology that was proposed by Hacker and Hatemi-J (2006). Our results indicate that although the expected long-run relationship holds for most of the G-7 countries, a break in this relationship occurred in the 1980s, followed by a subsequent revival after 2001.

Keywords: real economic activity; stock markets; G-7; long-run relationship (search for similar items in EconPapers)
JEL-codes: E44 G15 O50 (search for similar items in EconPapers)
Date: 2012-12-17
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