Paper #203

Title:

Stock returns, term structure, inflation and real activity: An international perspective

Authors:

Fabio Canova and Gianni de Nicolo

Date:

January 1997

Abstract:

This paper analyses the empirical interdependences among asset returns, real activity and inflation from a multicountry and international point of view. We find that nominal stock returns are significantly related to inflation only in the US, that the US 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.

Keywords:

Transmission, business cycles, international stock returns, financial markets

JEL codes:

C15, E43

Area of Research:

Macroeconomics and International Economics

Published in:

Macroeconomic Dynamics, 4(3), 2000, 343-372

Download the paper in PDF format