Working Paper

Measuring international economic linkages with stock market data

Abstract: The covariance between domestic and foreign equity return innovations is decomposed into components associated with news about future real and financial variables. In an application to fifteen national stock markets, we find that news about future dividend growth tends to be more highly correlated than contemporaneous output measures, suggesting that there are lags in the international transmission of real economic shocks. In addition, results from a longer sample period suggest that both real and financial linkages between the U.S. and the U.K. appear to have increased after the Bretton Woods currency arrangement was abandoned in the early 1970's.

Keywords: Stock market;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 1993

Number: 449