Back to Search Start Over

The dynamics of economic growth, oil prices, stock market depth, and other macroeconomic variables: Evidence from the G-20 countries

Authors :
Atanu Ghoshray
Mak B. Arvin
Rudra P. Pradhan
Source :
International Review of Financial Analysis. 39:84-95
Publication Year :
2015
Publisher :
Elsevier BV, 2015.

Abstract

This paper examines the linkages between economic growth, oil prices, depth in the stock market, and three other key macroeconomic indicators: real effective exchange rate, inflation rate, and real rate of interest. We employ a panel vector autoregressive model to test Granger causality for the G-20 countries over the period 1961–2012. A novel approach to this study is that we clearly demarcate the long-run and short-run relations between the economic variables. The results show a robust long-run economic relationship between economic growth, oil prices, stock market depth, real effective exchange rate, inflation rate, and real rate of interest. In the long run, real economic growth is found to respond to any deviation in the long-run equilibrium relationship that is found to exist between the different measures of stock market depth, oil prices, and the other macroeconomic variables. In the short run we find a complex network of causal relationships between the variables. While the empirical evidence of short-run causality is mixed, there is clear evidence that real economic growth responds to various measures of stock market depth, allowing for real oil price movements and changes in the real effective exchange rate, inflation rate, and real rate of interest.

Details

ISSN :
10575219
Volume :
39
Database :
OpenAIRE
Journal :
International Review of Financial Analysis
Accession number :
edsair.doi...........7b7febec9b75e9e69d0baba0a3ab2c06
Full Text :
https://doi.org/10.1016/j.irfa.2015.03.006