Revisiting Linkages between Stock Prices and Real Activity in OECD Countries: Does Finance Respond to Changing Situation of Economy?
Revisiting Linkages between Stock Prices and Real Activity in OECD Countries: Does Finance Respond to Changing Situation of Economy?

Summary/Abstract: The purpose of this study is to investigate whether financial markets contribute to the economy when needed. The quantile regression model and causality in variance tests are applied to monthly data from December 1989 to July 2016 for 19 OECD economies. The results confirm that the response of capital markets to economic growth depends more on the state of the economy than the state of the country’s development. Generally, interaction between financial markets and the economy is weak in OECD countries except Japan and Estonia.

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