Monetary policy and dividend growth in Germany: long-run structural modelling versus bounds testing approach
This study examines the long-run relationship between monetary policy and dividend growth in Germany. For this purpose, cointegration is tested for between both variables in the period 1974 to 2003. However, problems related to spurious regression arise from the mixed order of integration of the series used, from mutual causation between the variables and from the lack of a long-run relationship among the variables of the model. These problems are addressed by applying the bounds testing approach to cointegration in addition to a more standard long-run structural modelling approach. In principle, both procedures are capable of dealing with the controversial issue of the exogeneity of monetary policy vis-a-vis dividend growth. However, the structural modelling approach still leaves a certain degree of uncertainty about the integration properties of the interest rate and the dividend growth. Hence, one feels legitimized to refer to the bounds testing procedure and to conclude that in the longer term short-term rates drive stock returns but not vice versa.
Year of publication: |
2006
|
---|---|
Authors: | Belke, Ansgar ; Polleit, Thorsten |
Published in: |
Applied Economics. - Taylor & Francis Journals, ISSN 0003-6846. - Vol. 38.2006, 12, p. 1409-1423
|
Publisher: |
Taylor & Francis Journals |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
How the ECB and US Fed set interest rates
Belke, Ansgar, (2006)
-
Money and inflation: Lessons from the US for ECB monetary policy
Belke, Ansgar, (2007)
-
Money and inflation: Lessons from the USA for ECB monetary policy
Belke, Ansgar, (2007)
- More ...