Growth-returns nexus: Evidence from three Central and Eastern European countries |
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| Institution: | 1. Faculty of Economics and Management of Nabeul, ENVIE, University of Carthage, Tunisia and Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE), Canada;2. Laval University, Department of Agricultural Economics and Consumer Science, CREATE and Egg Industry Economic Research Chair, Canada;3. University of Carthage, Department of Industrial Economics, Polytechnic School of Tunisia, LEGI and Faculty of Economics and Management of Nabeul, Tunisia;1. University of Warsaw, Faculty of Economic Sciences, ul. Dluga 44/50, 00–241 Warszawa, Poland;2. Warsaw School of Economics, Al. Niepodleglosci 162, 02–554 Warszawa, Poland;3. Narodowy Bank Polski, ul. Swietokrzyska 11/21, 00–919 Warszawa, Poland;1. Output and Demand Division, European Central Bank, Frankfurt am Main, Germany;2. Macroeconomic Statistics Division, European Central Bank, Frankfurt am Main, Germany;1. Department of Business Administration, Athens University of Economics and Business, 76 Patission Street, GR-10434 Athens, Greece;2. IPAG Lab, IPAG Business School, 184 Boulevard Saint-Germain, FR-75006 Paris, France;3. Department of Banking and Financial Management, University of Piraeus, 80 Karaoli and Dimitriou, GR-18534 Piraeus, Greece |
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| Abstract: | Using a sample of monthly data from January 1996 to December 2012, we provide new evidence on the unidirectional Granger causality from real stock market returns to real economic activity in three Central and Eastern European countries: the Czech Republic, Hungary, and Poland. By employing the Granger causality tests of Cheung and Ng (1996) and Hong (2001), we show evidence of short-term (up to 6 months), medium-term (up to 12 months) and long-term (up to 24 months) causality for the Czech Republic and Hungary. In the case of Poland, only medium-term and long-term causality is found. Using rolling-correlation analysis, we find that although the growth–returns relationship is positive during the examined period, there is an apparent variability in the strength of this relationship that is particularly visible during the period of the financial crisis in the late 2000s. Consequently, we find that the predictive power of stock markets in the CEE-3 countries increases during periods of high market volatility and decreases during periods of economic recovery. |
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