The dynamic adjustments of stock prices to inflation disturbances

Exchange rate volatility and the time-varying effects of aggregate shocks

“…This model is similar to those of Sargent (2001, 2005), Primiceri (2005), Gali and Gambetti, 2009, and Keating and Valcarcel (2011, 2012. Consider the following VAR process: 4 In addition, a traditional structural vector autoregression (SVAR) approach that assumes constant autoregressive coefficients and homoskedastic structural shocks based on a constant covariance matrix of the reduced-form VAR would be unsuitable to either distinguish between the good luck and good policy explanations or capture exchange rate dynamics that may be characterized by substantial time variation.…”

“…Rather, they suggest that supply shocks may explain the increase in output volatility that resulted from the climate of uncertainty that characterized those two events. For example, Valcarcel (2012) shows similar increases in output growth volatility during the US Great Recession and its aftermath as largely explained by supply shocks. He shows this to occur at a time when the US inflation rate remained low, yet inflation volatility reached levels not seen since the Great US Inflation period.…”

The Impact of Government Spending on Private Spending in a Two-Sector Economy

“…The Great Recession period of 2008-2009 shows increasing volatilities in services and, especially, nondurable consumption-which, combined, comprise a substantial portion of gross domestic product (GDP). This increase in volatility in the largest component of GDP is consistent with the post-2007 increase in the uncertainty of economic activity that Valcarcel (2012) find. 26 Figure 6 shows that both services (figure 6a) and nondurable consumption spending (figure 6b) increase following an exogenous shock in government consumption.…”

Do stock markets lead or lag macroeconomic variables? Evidence from select European countries

“…Whilst this literature offers comprehensive insights regarding the spillover effects between stock markets and the real economy, typical assumptions of theoretical models have led to dramatically different conclusions on various economic relationships (Hacker et al, 2014) and findings suggest that the actual connections between stock prices and macroeconomic variables could be fluid (Valcarcel, 2012). In addition, insights are at times contradictory due to the use of different proxies to model a given variable, and outcomes which may have been period-specific or country-specific.…”