Asset Returns and Inflation in Response to Supply, Monetary, and Fiscal Disturbances.
This paper identifies sources of asset returns (stock returns and interest rates) and inflation relations. We find that the relation between asset returns and inflation is driven by three types of disturbances to the economy. We interpret them as due to supply disturbances and two types of demand--monetary and fiscal--disturbances. In post-war U.S. data, supply and fiscal disturbances drive a negative stock return-inflation relation, whereas monetary disturbances generate a positive stock return-inflation relation. However, all three types of disturbances generate a negative interest rate-inflation relation. Depending on the interaction of the three types of shocks, we observe different correlations between asset returns and inflation in post- and pre-World War II U.S. data. Copyright 2003 by Kluwer Academic Publishers
Year of publication: |
2003
|
---|---|
Authors: | Lee, Bong-Soo |
Published in: |
Review of Quantitative Finance and Accounting. - Springer. - Vol. 21.2003, 3, p. 207-31
|
Publisher: |
Springer |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Stock returns, asymmetric volatility, risk aversion, and business cycle : some new evidence
Kim, Sei-Wan, (2008)
-
Inflation, stock returns and interest rates
Lee, Bong-soo, (1986)
-
Capital investment and earnings : international evidence
Inci, Ahmet Can, (2009)
- More ...