Stock Returns, Term Structure, Inflation and Real Activity: An International Perspective
Universitat Pompeu Fabra Economics WP 203
Posted: 14 Apr 1997
This paper analyzes the empirical interdependencies among asset returns, real activity and inflation from a multi-country and international point of view. We find that nominal stock returns are significantly related to inflation only in the U.S, that the U.S. term structure of interest rates predicts both domestic and foreign inflation rates while foreign term structures do not have this predictive power, and that innovations in inflation and exchange rates induce insignificant responses of real and financial variables. An interpretation of the dynamics and some policy implications of the results are provided.
JEL Classification: C15, E43
Suggested Citation: Suggested Citation