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Time-Varying Causal Relationship between Stock Market and Unemployment in the United Kingdom: Historical Evidence from 1855 to 2017

Xolani Sibande (), Rangan Gupta () and Mark Wohar ()
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Xolani Sibande: Department of Economics, University of Pretoria, Pretoria, South Africa

No 201863, Working Papers from University of Pretoria, Department of Economics

Abstract: The influence of financial markets on the real economy, including that of stock market returns on unemployment, is a key focus in the literature. Using DCC-MGARCH tests, we analyse time-varying causality between stock market returns and unemployment in the UK using monthly data from 1855 to 2017. The tests reveal that there is significant evidence of information spillover between the stock market and the labour market. This information spillover was found to be significant in the direction of stock market returns to unemployment, insignificant in the opposite direction, and significant bi-directionally. The results were also found to be congruent to the macroeconomic history of the UK.

Keywords: Time-varying Granger causality; stock market returns; unemployment (search for similar items in EconPapers)
JEL-codes: C12 C32 J01 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-his and nep-mac
Date: 2018-10
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