Revisiting The Causality Between Stock Returns And Inflation
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| Author | : Paulo R. S. Terra |
| Publisher | : |
| Total Pages | : 57 |
| Release | : 2006 |
| Genre | : |
| ISBN | : |
Different explanations have been suggested for the puzzling negative relationship observed between stock returns and inflation. The most popular ones have been the Tax-Effects Hypothesis (Feldstein, 1980), the Proxy Hypothesis (Fama, 1981), and the Reverse Causality Hypothesis (Geske and Roll, 1983). Distinguishing the causal chain between the variables is crucial to sort out which hypothesis best fits the data. This paper employs a VAR approach to investigate the causality relationships among inflation, stock returns, interest rates, and real activity in a sample of seven Latin American developing countries and seven industrial countries. Extant empirical research employs mostly advanced economies data, and only a few uses emerging markets data. The main findings indicate that the differences between industrial and developing countries are not as sharp as one might initially presume, with slightly more support to the Reverse Causality Hypothesis. Also, the results do not in general support previous findings that are largely based on United States data, even among other industrial countries.
| Author | : Mohammed A. Abu-Ali |
| Publisher | : |
| Total Pages | : 294 |
| Release | : 2003 |
| Genre | : |
| ISBN | : |
| Author | : Yakov Amihud |
| Publisher | : |
| Total Pages | : |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
This paper examines the effects of unexpected inflation on stock prices, using Israeli data which provide a direct market-based measure of unexpected inflation: the price reaction of CPI-linked bonds following the CPI announcement. The results show that stock prices have a strong negative relationship with unexpected inflation. The Israeli setting rules out a number of hypotheses advanced in the United States to explain this relationship, such as nominal contracting, inflationary taxation, wealth transfer, and money illusion. This suggests that the negative effect of unexpected inflation is due to its negative association with real activity and its real economic cost.
| Author | : Bong-Soo Lee |
| Publisher | : |
| Total Pages | : 35 |
| Release | : 2009 |
| Genre | : |
| ISBN | : |
The stock return-inflation relation has been an important issue in financial economics. Several hypotheses have been proposed to explain the relation. Among these, the Modigliani and Cohn's inflation illusion hypothesis has received renewed attention recently. Another hypothesis is the two-regime hypothesis. We reexamine these hypotheses using long sample data. We find that the Modigliani and Cohn hypothesis can explain the post-war negative relation between stock returns and inflation, but it is not easily compatible with the pre-war positive relation. We confirm the presence of two regimes in the relation between the pre- and post-war periods using an alternative structural VAR identification method.
| Author | : Deepa Mangala |
| Publisher | : |
| Total Pages | : 11 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
The relationship between stock prices and macroeconomic variables varies across countries, time periods, datasets used, and the frequency of data used. Thus, an in-depth study to reinvestigate the relationship between selected macroeconomic variables i.e. inflation rate, exchange rate, index of industrial production, gold price, money supply and yields on treasury bills, and Indian stock market for the period of April 2005 to March 2014 has been carried out. In this study Johansen's cointegration test, vector error correction model (VECM), impulse response functions (IRFs), and variance decomposition (VDCs) test have been applied. The results of Johansen cointegration test indicates a significant negative relationship between exchange rate, inflation rate, and index of industrial production with stock prices whereas there exists a significantly positive relationship of money supply and yield on treasury bills with stock prices. Vector error correction model helps to determine both short and long run causal relationship between macroeconomic variables and stock price. The results found short run causality runs from exchange rate to Nifty, Nifty to money supply, and inflation rate whereas long run causality found from Nifty to short term interest rate and money supply.
| Author | : Bala Ramasamy |
| Publisher | : |
| Total Pages | : 34 |
| Release | : 2001 |
| Genre | : Foreign exchange rates |
| ISBN | : |
| Author | : Jeong-Ryeol Kim |
| Publisher | : |
| Total Pages | : 21 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
In this paper, we use a modified concept of Granger-(non)causality in reconsidering theIn der vorliegenden Arbeit soll das konventionelle Konzept der Granger-Kausalität.
| Author | : Ramazan Gençay |
| Publisher | : Elsevier |
| Total Pages | : 383 |
| Release | : 2001-10-12 |
| Genre | : Business & Economics |
| ISBN | : 0080509223 |
An Introduction to Wavelets and Other Filtering Methods in Finance and Economics presents a unified view of filtering techniques with a special focus on wavelet analysis in finance and economics. It emphasizes the methods and explanations of the theory that underlies them. It also concentrates on exactly what wavelet analysis (and filtering methods in general) can reveal about a time series. It offers testing issues which can be performed with wavelets in conjunction with the multi-resolution analysis. The descriptive focus of the book avoids proofs and provides easy access to a wide spectrum of parametric and nonparametric filtering methods. Examples and empirical applications will show readers the capabilities, advantages, and disadvantages of each method. The first book to present a unified view of filtering techniques Concentrates on exactly what wavelets analysis and filtering methods in general can reveal about a time series Provides easy access to a wide spectrum of parametric and non-parametric filtering methods
| Author | : Aslı Demirgüç-Kunt |
| Publisher | : MIT Press |
| Total Pages | : 452 |
| Release | : 2001 |
| Genre | : Business & Economics |
| ISBN | : 9780262541794 |
CD-ROM contains: World Bank data.
| Author | : Mr.Jaromir Benes |
| Publisher | : International Monetary Fund |
| Total Pages | : 71 |
| Release | : 2012-08-01 |
| Genre | : Business & Economics |
| ISBN | : 1475505523 |
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.
