Broome, Simon J. (2000) Long-run and short-run linkages between stock prices and interest rates in the G-7. Applied Economics Letters, 7. pp. 321-323. ISSN 1350-4851

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Abstract

There has been a substantial amount of research on the interrelationships between the main stock markets and onthe interdependence of the main bond markets around the world. However, there have been very few papers that have investigated the relationship between an individual country’s stock market and interest rate, then compared this interrelationship over a number of countries. As market across countries become more closely related due to technical progress and widespread financial deregulation, so different financial markets within countries should also become more closely integrated.The aim of this paper is to determine whether stock prices and interest rates share common trend or commoncycle. The cointegration technique isused to test for a long -run common trend, and codependence analysis is used to test for a short-run common cycle. Co-dependence hasbeen used by Vahid and Engle (1993)among others, to analyse common cycles between output and consumption. As both interest rates and stock prices are related to thebusiness cycle, it would theoretically beexpected that both should follow a cyclical pattern.

Item Type:	Article
Keywords:	Long-run; short-run; linkages; stock prices; interest rates; G-7;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	8430
Depositing User:	Dr Simon Broome
Date Deposited:	11 Jul 2017 11:59
Journal or Publication Title:	Applied Economics Letters
Publisher:	Taylor & Francis
Refereed:	Yes
URI:	Publisher
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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