Dynamic and asymmetric impacts of macroeconomic fundamentals on an integrated stock market [An article from: Journal of International Financial Markets, Institutions & Money]

This digital document is a journal article from Journal of International Financial Markets, Institutions & Money, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
A large body of evidence indicates that macroeconomic and financial variables are dynamically interrelated. In an international setup, we analyze the transmission mechanisms of macroeconomic shocks on the stock market of a small open economy in an increasingly integrated world. We use a time-varying vector error correction model (VECM) that allows analysis of asymmetric impacts that depend on the state of the business cycle. A special focus is directed on monetary policy surprises, where we find that foreign shocks exert a strong influence on an integrated stock market, and that the stage of the business cycle heavily affects the signals of the shocks.