Munich Personal RePEc Archive

Exploring the finance-real economy link in U.S.: Empirical evidence from Panel Unit Root and Cointegration Analysis

Niang, Abdou-Aziz and Diagne, Abdoulaye and Pichery, Marie-Claude (2010): Exploring the finance-real economy link in U.S.: Empirical evidence from Panel Unit Root and Cointegration Analysis.

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Abstract

The aim of this paper is to analyze the relationships between common shocks affecting the real economy and those underlying co-fluctuations in U.S. financial markets. In order to do this, we test for links between these common factors and also use the econometric theory of nonstationary panel data to estimate the relationships. The estimates prove the existence of significant relationships between financial and macroeconomic factors. It is also shown that there are forces pulling U.S. financial markets to move with the real economy, as seen through nearly instantaneous adjustment to a new equilibrium.

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