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STOCK RETURNS, TERM STRUCTURE, INFLATION, AND REAL ACTIVITY: ANINTERNATIONAL PERSPECTIVE

Published online by Cambridge University Press:  05 October 2000

Fabio Canova  and
Gianni De Nicoló
Fabio Canova
Affiliation:
Universitat Pompeu Fabra
Gianni De Nicoló
Affiliation:
Federal Reserve Board
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Abstract

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This paper analyzes the empirical interdependecies among asset returns, real activity, and inflation from multicountry and international points of view. We find that innovations in nominal stock returns are not significantly related to inflation or real activity, that the U.S. term structure of interest rates predicts both domestic and foreign inflation rates and domestic future real activity, and that innovations in inflation do not significantly affect real activity. An interpretation of the dynamics and some policy implications of the results are provided.

Keywords

TransmissionBusiness CyclesInternational Stock ReturnsFinancial Markets
Type
Research Article
Information
Macroeconomic Dynamics , Volume 4 , Issue 3 , September 2000 , pp. 343 - 372
Copyright
© 2000 Cambridge University Press