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Stock returns, term structure, inflation and real activity: An international perspective
Canova, Fabio; de Nicolo, Gianni
Universitat Pompeu Fabra. Departament d'Economia i Empresa
This paper analyses the empirical interdependences among assetreturns, real activity and inflation from a multicountry and internationalpoint of view. We find that nominal stock returns are significantly relatedto inflation only in the US, that the US term structure of interest ratespredicts both domestic and foreign inflation rates while foreign termstructures do not have this predictive power and that innovations in inflationand exchange rates induce insignificant responses of real and financialvariables. An interpretation of the dynamics and some policy implicationsof the results are provided.
Macroeconomics and International Economics
business cycles
international stock returns
financial markets
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