Prague Economic Papers 2020, 29(1):105-126 | DOI: 10.18267/j.pep.707

Revisiting Linkages between Stock Prices and Real Activity in OECD Countries: Does Finance Respond to Changing Situation of Economy?

Mercan Hatipoglua
a Cankiri Karatekin University, Cankiri, Turkey

The purpose of this study is to investigate whether financial markets contribute to the eco-nomy when needed. The quantile regression model and causality in variance tests are applied to monthly data from December 1989 to July 2016 for 19 OECD economies. The results confirm that the response of capital markets to economic growth depends more on the state of the economy than the state of the country's development. Generally, interaction between financial markets and the economy is weak in OECD countries except Japan and Estonia.

Keywords: stock market, economic growth, quantile regression
JEL classification: G10, O11, O47

Received: July 18, 2017; Accepted: September 21, 2018; Prepublished online: September 23, 2019; Published: February 25, 2020  Show citation

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Hatipoglu, M. (2020). Revisiting Linkages between Stock Prices and Real Activity in OECD Countries: Does Finance Respond to Changing Situation of Economy? Prague Economic Papers, 29(1), 105-126. doi: 10.18267/j.pep.707
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