Menu Expand

Brokers and Business Cycles: Does Financial Market Volatility Cause Real Fluctuations?

Cite JOURNAL ARTICLE

Style

Döpke, J., Pierdzioch, C. Brokers and Business Cycles: Does Financial Market Volatility Cause Real Fluctuations?. Credit and Capital Markets – Kredit und Kapital, 34(3), 327-355. https://doi.org/10.3790/ccm.34.3.327
Döpke, Jörg and Pierdzioch, Christian "Brokers and Business Cycles: Does Financial Market Volatility Cause Real Fluctuations?" Credit and Capital Markets – Kredit und Kapital 34.3, 2001, 327-355. https://doi.org/10.3790/ccm.34.3.327
Döpke, Jörg/Pierdzioch, Christian (2001): Brokers and Business Cycles: Does Financial Market Volatility Cause Real Fluctuations?, in: Credit and Capital Markets – Kredit und Kapital, vol. 34, iss. 3, 327-355, [online] https://doi.org/10.3790/ccm.34.3.327

Format

Brokers and Business Cycles: Does Financial Market Volatility Cause Real Fluctuations?

Döpke, Jörg | Pierdzioch, Christian

Credit and Capital Markets – Kredit und Kapital, Vol. 34 (2001), Iss. 3 : pp. 327–355

Additional Information

Article Details

Author Details

Jörg Döpke, Kiel

Christian Pierdzioch, Kiel

References

  1. Bell, G. K. and J. Campa (1997): Irreversible Investment and Volatile Markets: A Study of the Chemical Processing Industry, The Review of Economics and Statistics 79, 79-87.  Google Scholar
  2. Bernanke, B. (1983): Irreversibility, Uncertainty, and Cyclical Investment, Quarterly Journal of Economics 98, 85-106.  Google Scholar
  3. Bianchi, M. (1995): Granger Causality in the Presence of Structural Changes. Discussion Paper No. 33 (Bank of England).  Google Scholar
  4. Bittlingmeyer, G. (1998): Ouput, Stock Volatility, and Political Uncertainty in a Natural Experiment: Germany, 1880-1940, Journal of Finance 53, 2243-2257.  Google Scholar
  5. Bollerslev, T. (1986): A Generalized Autoregressive Conditional Heteroscedasticity, Journal of Econometrics 31, 307-327.  Google Scholar

Abstract

This paper analyzes the link between financial market volatility and real economic activity. Using monthly data for Germany from 1968 to 1998, we specify GARCH models to capture the volatility of stock market prices, of the real exchange rate, and of a long-term and of a short-term rate of interest and test for the impact of the conditional variance on the future stance of the business cycle and on the volatility of industrial production. The results of our empirical investigation lead us to reject the hypothesis that financial market volatility causes the cycle or real volatility. (JEL C32, D8, E32)