nep-mac New Economics Papers
on Macroeconomics
Issue of 2006‒11‒12
27 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. A New Cost Channel of Monetary Policy By Cenesiz, Alper
  2. Labor-Market Search, Financial Market Integration, and Macroeconomic Dynamics By Cenesiz, Alper; Pierdzioch, Christian
  3. Datation du Cycle du PIB Camerounais entre 1960 et 2003 By Odia Ndongo, Yves Francis
  4. Capital Mobility, Labor Markets, and Macroeconomic Policies By Cenesiz, Alper; Pierdzioch, Christian
  5. On stabilisation policy: Are there conflicting implications for growth and welfare? By Dimitrios Varvarigos
  6. Efficiency Wages, Financial Market Integration, and Macroeconomic Dynamics By Cenesiz, Alper; Pierdzioch, Christian
  7. Changes in the International Comovement of Stock Returns and Asymmetric Macroeconomic Shocks By Kizys, Renatas; Pierdzioch, Christian
  8. Capital Mobility and Labor Market Volatility By Cenesiz, Alper; Pierdzioch, Christian
  9. Can We Predict GDP Through Examining the Past Values of Money? Empirical Evidence from an Asian Tiger By Feridun, Mete
  10. Supply of Money By Barnett, William A.
  11. Divisia Monetary Index By Barnett, William A.
  12. Causas y consecuencias de la evolución reciente del precio del petróleo By Ruiz, Juan
  13. Inflation and the underground economy By Ahiabu, Stephen
  14. Excess Sensitivity of Consumption Using Micro Data in The UK By YU, Ge
  15. La théorie et la modélisation macroéconomiques, d'hier à aujourd'hui. By Michel De Vroey; Pierre Malgrange
  16. Economic and Financial Crises and the Predictability of U.S. Stock Returns By Hartmann, Daniel; Kempa, Bernd; Pierdzioch, Christian
  17. Restoring Fiscal Sustainability in the Euro Area: Raise Taxes or Curb Spending? By Boris Cournède; Frédéric Gonand
  18. Rotterdam vs Almost Ideal Models: Will the Best Demand Specification Please Stand Up? By Barnett, William A.; Seck, Ousmane
  19. Did F. A. Hayek Embrace Popperian Falsificationism? - A Critical Comment About Certain Theses of Popper, Duhem and Austrian Methodology By van den Hauwe, Ludwig
  20. Long-Run Relationship between Economic Growth and Stock Returns: An Empirical Investigation on Canada and the United States By Feridun, Mete
  21. Slavery and other property rights By Lagerlöf, Nils-Petter
  22. On Linear Quadratic Approximations By Debortoli, Davide; Nunes, Ricardo
  23. Crime and Punishment in the "American Dream" By Di Tella, Rafael; Dubra, Juan
  24. Structural Reforms in the EU and Political Myopia in Economic Policies By Kari E.O. Alho
  25. Nonlinear Links between Stock Returns and Exchange Rate Movements By Hartmann, Daniel; Pierdzioch, Christian
  26. Microeconomic determinants of acquisitions of Eastern European banks by Western European banks By G. LANINE; R. VANDER VENNET
  27. International Equity Flows and the Predictability of U.S. Stock Returns By Hartmann, Daniel; Pierdzioch, Christian

  1. By: Cenesiz, Alper
    Abstract: I develop a new cost channel of monetary policy transmission in a small scale, dynamic, general equilibrium model. The new cost channel of monetary policy transmission implies that the frequency of price adjustment increases in the nominal interest rate. I report that allowing for the new cost channel can account both for the muted and delayed inflation response and for the persistence of the output response to monetary policy shocks. Without any additional assumption, my model can also generate the delayed output response.
    Keywords: Price stickiness; Monetary policy; Price adjustment; Persistence.
    JEL: E52 E32 E31
    Date: 2006–07
  2. By: Cenesiz, Alper; Pierdzioch, Christian
    Abstract: We used a dynamic two-country optimizing model to analyze the implications of financial market integration for macroeconomic dynamics. The model features a labor-market friction in the form of labor-market search. We used the model to analyze how labor-market search affects how financial market integration changes macroeconomic dynamics in the aftermath of a monetary policy shock, a government spending shock, and a productivity shock. We found that labor-market search has nontrivial, and quantitatively large implications for the way financial market integration affects macroeconomic dynamics.
    Keywords: Open economy macroeconomics; Financial market integration; Labor-market search; Macroeconomic dynamics
    JEL: E42 E44 F36 F41
    Date: 2006–03
  3. By: Odia Ndongo, Yves Francis
    Abstract: This work aims to analyse the dynamics of macroeconomic fluctuations in Cameroon and to determine the resulting business and growth cycles turning point chronology. The construction of a reference turning point chronology poses some problems related to the choice of the methods to be used. In this work, we use the Bry and Broschan algorithm and the HODRICK-PRESCOTT filter to estimate the Cameroonian classical business cycle and growth cycle turning point chronology respectively. On the one hand, the results obtained point to a great similarity in the duration phases of the two kinds of cycles. On the other hand, the emerging cycles allow us to observe the influence of the negative shock of the 1985-86 years on the evolution of the Cameroonian GDP cycle.
    Keywords: macroeconomic fluctuations; business cycles; growth cycles
    JEL: E65 E37 N1 E32
    Date: 2006–10–21
  4. By: Cenesiz, Alper; Pierdzioch, Christian
    Abstract: We used a dynamic two-country optimizing model featuring a labor-market friction to analyze the implications of international capital mobility for the effectiveness of macroeconomic policies in an open economy. Conventional wisdom suggests that higher capital mobility significantly increases (decreases) the effectiveness of monetary (fiscal) policy. Simulations of the model suggest that accounting for a labor-market friction substantially reduces the quantitative impact of capital mobility on the effectiveness of monetary and fiscal policy.
    Keywords: Open economy macroeconomics; Financial markets; Labor-market friction
    JEL: F41
    Date: 2006–01
  5. By: Dimitrios Varvarigos (Dept of Economics, Loughborough University)
    Abstract: The paper examines the choices for fiscal stabilisation policy that maximise aggregate welfare and long-run growth. This is done in the context of a stochastic dynamic general equilibrium model where premeditated learning provides the engine of human capital accumulation and growth, and technology shocks provide the impulse source of fluctuations. Contrary to existing conventional wisdom, the results indicate a conflict between the two policy objectives: the choice of no stabilisation, associated with maximum growth, is also associated with minimum welfare. Welfare maximisation requires a full stabilisation response to the occurrence of business cycles.
    Keywords: money; growth; volatility.
    JEL: E32 E63 O41
    Date: 2006–07
  6. By: Cenesiz, Alper; Pierdzioch, Christian
    Abstract: We used a dynamic two-country optimizing model featuring a labor-market friction in the form of efficiency wages to analyze the implications of financial market integration for macroeconomic dynamics. Efficiency wages tend to magnify the effect of financial market integration on macroeconomic dynamics. As compared to a model featuring a Walrasian labor market, efficiency wages may even reverse the direction of the change in macroeconomic dynamics caused by financial market integration.
    Keywords: Open economy macroeconomics; Financial market integration; Efficiency wages
    JEL: F36 E44 F41
    Date: 2006–05
  7. By: Kizys, Renatas; Pierdzioch, Christian
    Abstract: We study whether asymmetric macroeconomic shocks help to explain changes in the international comovement of monthly stock returns in major industrialized countries over the period 1970-2004. Based on a time-varying parameter model, we trace out how the pattern of international comovement of stock returns changed over time. In order to identify asymmetric macroeconomic shocks, we estimate vector autoregressive models. The results of estimating time-series regression models and panel-data models indicate that changes in the international comovement of stock returns are not systematically linked to macroeconomic shocks.
    Keywords: International comovement of stock returns; Asymmetric macroeconomic shocks; Time-varying parameter model; Time-series regression model; Panel-data model
    JEL: G15 E31 F37
    Date: 2006–07
  8. By: Cenesiz, Alper; Pierdzioch, Christian
    Abstract: We used a dynamic two-country optimizing model featuring efficiency wages to analyze the implications of capital mobility for labor market volatility. Capital mobility magnifies the short-run effects of productivity shocks and monetary shocks on employment and the real wage, but dampens the medium-run effects. The overall effects of capital mobility on the volatility of employment and the real wage, their cyclical properties, and the persistence of employment fluctuations are moderate.
    Keywords: Capital mobility; Efficiency wages; Labor market volatility
    JEL: F36 E44 F41
    Date: 2006–08
  9. By: Feridun, Mete
    Abstract: The paper aims at establishing whether the fluctuations of money help predict future fluctuations of income, that are not already predictable on the basis of fluctuations of income itself or other readily observable variables. For this purpose vector autoregression (VAR) modelling is used to test whether changes in money supply (M2) has any deterministic or predictive content for movements in Income (GDP). The analysis is performed using quarterly macroeconomic data from Singapore spanning the period between 1980 and 2001. The results suggest that money (M2) and interest rates have information content for future movements in real GDP beyond that contained in past values of GDP itself. This relationship only establishes itself with a fairly long lag. The finding suggests the possibility of making use of the money-income relationship for forecasting purposes.
    Keywords: Vector autoregression (VAR); cointegration; causality
    JEL: E30
    Date: 2005–07
  10. By: Barnett, William A.
    Abstract: This short paper is the encyclopedia entry on Supply of Money to appear in the second edition of the International Encyclopedia of the Social Sciences. The encyclopedia is edited by William A. Darity and forthcoming from Macmillan Reference USA (Thomson Gale).
    Keywords: monetary aggregation; index number theory; Divisia index; encyclopedia entry; aggregation theory; supply of money
    JEL: E5 E4 C43 G12
    Date: 2006–07–14
  11. By: Barnett, William A.
    Abstract: This short paper is the first draft of an encyclopedia entry on Divisia Monetary Indexes to appear in the second edition of the International Encyclopedia of the Social Sciences. The encyclopedia is edited by William A. Darity and forthcoming from Macmillan Reference USA (Thomson Gale).
    Keywords: monetary aggregation; index number theory; Divisia index' encyclopedia entry; aggregation theory
    JEL: E5 E4 C43 G12
    Date: 2006–04–18
  12. By: Ruiz, Juan
    Abstract: The price of oil has had a marked increase since 2002. The prices of Brent and West Texas Intermediate (WTI) crude -the two main benhcmarks of the market- have surpassed their historical maximum reached in 1991 during the first Gulf War, though, in real terms, the price of oil is still below that of 1980. This increase in prices, and the risk of further increments, justifies an evaluation of the consequences on global growth and inflation. This article presents a brief review of the recent evolution of the price of oil and tries to identify the main factors behind its increase. In addition, some factors that can influence the future evolution of the price of oil in the short and long run are presented, as well as an estimation of the effect of a further increase in the price of oil over growth and inflation for the main industrial economies.
    Keywords: Oil price; growth; inflation; global economy
    JEL: E17 E66 Q43
    Date: 2004–12–16
  13. By: Ahiabu, Stephen
    Abstract: This paper studies the optimal rate of seigniorage in an economy characterized by decentralized trade and a tax-evading underground sector. The economy has buyers, some of whom visit the formal market, while others visit the underground market. I find that the optimal rate of inflation depends on which of the two sectors, formal or underground, is more crowded/congested with buyers. If the underground sector is more crowded, the optimal inflation rate is as high as 42% per annum for Peru. That is, I offer a possible motivation for the high rates of inflation observed in that country from the mid 1970s up to the mid 1990s. If the formal sector is more crowded, optimal inflation falls to about 1.4%, which is close to the rate in 2005. Friedman rule is not optimal.
    Keywords: Inflation; Market Congestion; Ramsey Equilibrium; Underground Economy
    JEL: E6 E26 H21
    Date: 2006–10
  14. By: YU, Ge
    Abstract: The impact of the subjective variables specific to individual financial well being on economic outcomes is considered whether they are able to predict the growth of household consumption. Subjective variables include more information that is difficult to be identified or valued in previous empirical work compared to real income. The empirical analysis finds that the financial well being variables do predict the household consumption of non-durable goods. Higher financial expectations are correlated with less saving. I also find some of the rejection of the PIH is due to asymmetric preferences and the systematic heterogeneity in forecast errors.
    Keywords: systematic errors; expectations errors; PIH; REPIH; asymmetric preference; excess sensitivity
    JEL: E21 E13
    Date: 2005
  15. By: Michel De Vroey; Pierre Malgrange
    Abstract: Nous retraçons à grands traits l'évolution de la macroéconomie de sa naissance à nos jours, son émergence dans les années 1930, puis la période de règne sans partage de la macroéconomie keynésienne des années 1950 à 1970. L'étape suivante de son évolution est l'offensive menée par Milton Friedman et Robert Lucas contre la macroéconomie keynésienne. Les travaux de ces auteurs ont débouché sur un changement de perspective qui nous paraît mériter d'être épinglé comme une "révolution scientifique" à la Kuhn, l'émergence de la macroéconomie dynamique et stochastique. Avec celle-ci, le centre d'intérêt de la théorie et de la modélisation macroéconomie se déplace. Le thème des défaillances de l'économie de marché, et en particulier du chômage, est délaissé au profit d'un examen des phénomènes du cycle et de la croissance, ceux-ci étant étudiés à partir de l'hypothèse d'un fonctionnement efficace du système. Ces dernières années ont vu l'émergence d'une "nouvelle synthèse néoclassique" rejouant le jeu de la synthèse ancienne avec une combinaison d'éléments keynésiens et classiques, tout en adoptant la méthodologie nouvelle de discipline de l'équilibre et de rationalité des agents. ### [english abstract: An outline of the evolution from the birth up to present days of the macroeconomics is laid out, its emergence during the thirties, then the period of the domination of the Keynesian macroeconomics of the years 1950 to 1970. The following stage of the evolution has been the attack from Milton Friedman and Robert Lucas against Keynesian macroeconomics. We consider the works of these authors deserve the label of a "scientific revolution à la Kuhn", with the emergence of the dynamic and stochastic macroeconomics. Associated with this, the focus of macroeconomics has shifted. Themes linked to market failures, and especially to unemployment disappear, in favour of cycle and growth analysis, these last being studied from the postulate of efficient working of the system. These last years have seen the emergence of a "New Neoclassical Synthesis" mimicking the old synthesis in combining keynesian and classical elements, while adopting the new methodology of equilibrium discipline and of agents rational behaviour.] ###
    Date: 2006
  16. By: Hartmann, Daniel; Kempa, Bernd; Pierdzioch, Christian
    Abstract: We argue that the use of publicly available and easily accessible information on economic and financial crises to detect structural breaks in the link between stock returns and macroeconomic predictor variables improves the performance of simple trading rules in real time. In particular, our results suggest that accounting for structural breaks and regime shifts in forecasting regressions caused by economic and financial crises has the potential to increase the out-of-sample predictability of stock returns, the performance of simple trading rules, and the market-timing ability of an investor trading in the U.S. stock market.
    Keywords: Forecasting stock returns; financial and economic crises; trading rules
    JEL: C53 G11 E44
    Date: 2006–10
  17. By: Boris Cournède; Frédéric Gonand
    Abstract: With population ageing, fiscal consolidation has become of paramount importance for euro area countries. Consolidation can be pursued in various ways, with different effects on potential growth, which itself will be dragged down by ageing. A dynamic general equilibrium model with overlapping generations and a public finance block (including a pay-as-you-go pension regime, a health care system, non ageingrelated public spending and a stock of debt to be repaid) is used to compare the macroeconomic impact of four scenarios: a) increasing taxes to finance unchanged pensions and repay public debt, b) lowering future pension replacement rates and repaying public debt through a lower ratio of non ageing-related outlays to GDP, c) raising the retirement age by 1.25 years per decade and increasing taxes only to pay off debt, and d) increasing the retirement age by 1.25 years per decade and paying off debt through a lower ratio of non ageing-related expenditure to GDP. This last scenario is the one where growth is strongest: with gradual increases in the retirement age and spending restraint, average GDP growth in the 2010s would be 0.34 percentage point stronger than in a scenario where fiscal consolidation is achieved exclusively through tax hikes. The appropriate conclusion from the model is not that public spending is bad per se, but that cuts to lower-priority spending items can deliver surprisingly large income gains compared with the alternative of raising taxes. <P>Rétablir la soutenabilité des finances publiques dans la zone euro : Augmenter les impôts ou maïtriser les dépenses ? <BR>Le vieillissement démographique renforce la nécessité d'un redressement des finances publiques dans la zone euro. Ce redressement peut emprunter plusieurs voies dont les effets sur la croissance potentielle sont variables, et dans un contexte où le vieillissement lui-même pèse sur l'activité à long terme. Un modèle d'équilibre général dynamique avec générations imbriquées, intégrant une modélisation des finances publiques avec un régime de retraites par répartition, un système d'assurance-maladie, des dépenses publiques non liées à l'âge et un stock de dette publique à rembourser, permet d'étudier l'impact macroéconomique de quatre scénarios de consolidation: a) hausse généralisée des prélèvements obligatoires pour financer l'accélération des dépenses sociales et rembourser la dette, b) baisse des taux de remplacement pour les futurs retraités et maîtrise des dépenses publiques non liées à l'âge pour rembourser la dette, c) augmentation de l'âge moyen de départ à la retraite de 1.25 année par décade et augmentation des impôts limitée au remboursement de la dette, d) augmentation de l'âge de départ à la retraite de 1.25 année par décade et remboursement de la dette par maîtrise des dépenses publiques. C'est ce dernier scénario qui aboutit au taux de croissance le plus élevé: une augmentation graduelle de l'âge de la retraite et une maîtrise des dépenses non liées à l'âge permettrait de relever le taux moyen de croissance potentielle pendant la décennie 2010 de 1/3 de point de PIB dans la zone euro, par rapport à une consolidation procédant par hausses générales d'impôts. La conclusion de cet exercice ne consiste pas à prétendre que les dépenses publiques seraient mauvaises en soi pour l'économie, mais qu'une baisse des dépenses dans des secteurs non prioritaires permettrait de dégager des gains significatifs en matière de croissance par comparaison à un recours massif aux prélèvements obligatoires.
    Keywords: public debt, dette publique, ageing, dépenses publiques, public expenditure, vieillissement, zone Euro, fiscal consolidation, fiscal sustainability, consolidation fiscale, euro area, potential growth, croissance potentielle, soutenabilité des finances publiques, general equilibrium, équilibre général
    JEL: D58 E27 E60 H55 H63 J11
    Date: 2006–10–30
  18. By: Barnett, William A.; Seck, Ousmane
    Abstract: Among the many demand specifications in the literature, the Rotterdam model and the Almost Ideal Demand System (AIDS) have particularly long histories, have been highly developed, and are often applied in consumer demand systems modeling. Using Monte Carlo techniques, we seek to determine which model performs better in terms of its ability to recover the true elasticities of demand. We derive the correct formulae for the AIDS models elasticities, when the T¨ornqvist or two modified versions of the Stone index are used to linearize the model. The resulting linearized AIDS are compared to the full AIDS.
    Keywords: Rotterdam Model; Almost Ideal Model; consumer demand system; Monte Carlo study; flexible functional forms
    JEL: C43 C32 E17 C51 C3
    Date: 2006–02–06
  19. By: van den Hauwe, Ludwig
    Abstract: The author of this article argues that Hayek´s methodological outlook at the time he engaged in business cycle research was actually closer to praxeological apriorism than to Popperian falsificationism. A consideration of the Duhem thesis highlights the fact that even from a mainstream methodological perspective falsificationism is more problematic than is often realized. Even if the praxeological and mainstream lines of argumentation reject the Popperian emphasis on falsification for different reasons and from a different background, the prospects for falsificationism in economic methodology seem rather bleak.
    Keywords: General Methodology; Austrian Methodology; Falsificationism; Popper; Hayek; Duhem; Duhemian Argument; Testing of Theories; Meaning and Interpretation of Econometric Results; Correlation and Causality;
    JEL: B20 C10 B23 A12 E32 B53 B40
    Date: 2006
  20. By: Feridun, Mete
    Abstract: This article examines the long run relationship between economic growth and stock prices for Canada and the United States through cointegration estimation procedure, and it implements the Vector Error Correction Models (VECM) to abstract simultaneously the short- and long-run information in the modeling process. Results from the cointegration tests reveal that economic growth and stock prices share long run equilibrium relationship for both Canada and the U.S. The results from the VECM indicate that for the U.S., causality runs from economic growth to stock prices but not vice versa. However for Canada, the results reveal that there is a bi-directional causality between economic growth and stock prices.
    Keywords: stock returns; interest rates; economic growth; Canada; the United tates S
    JEL: E0
    Date: 2006–03
  21. By: Lagerlöf, Nils-Petter
    Abstract: The institution of slavery is found mostly at intermediate stages of agricultural development, and less often among hunter-gatherers and advanced agrarian societies. We explain this pattern in a growth model with land and labor as inputs in production, and an endogenously determined property rights institution. The economy endogenously transits from an egalitarian state with equal property rights, to a despotic slave society where the elite own both people and land; thereafter it endogenously transits into a free labor society, where the elite own the land, but people are free.
    Keywords: Slavery; long-run growth
    JEL: E0 Q15 P51
    Date: 2003–05
  22. By: Debortoli, Davide; Nunes, Ricardo
    Abstract: We prove the generality of the methodology proposed in Benigno and Woodford (2006). We show that, even in the presence of a distorted steady state, it is always possible and relatively simple to obtain a purely quadratic approximation to the welfare measure. We also show that, in order to do so, the timeless perspective assumption is crucial.
    Keywords: Linear-Quadratic Approximation; Distorted Steady State; Timeless Perspective
    JEL: C60 E0
    Date: 2006–07
  23. By: Di Tella, Rafael; Dubra, Juan
    Abstract: We observe that countries where belief in the "American dream" (i.e., effort pays) prevails also set harsher punishment for criminals. We know from previous work that beliefs are also correlated with several features of the economic system (taxation, social insurance, etc). Our objective is to study the joint determination of these three features (beliefs, punitiveness and economic system) in a way that replicates the observed empirical patterns. We present a model where beliefs determine the types of contracts that firms offer and whether workers exert effort. Some workers become criminals, depending on their luck in the labor market, the expected punishment, and an individual shock that we call "meanness". It is this meanness level that a penal system based on "retribution" tries to detect when deciding the severity of the punishment. We find that when initial beliefs differ, two equilibria can emerge out of identical fundamentals. In the "American" (as opposed to the "French") equilibrium, belief in the "American dream" is commonplace, workers exert effort, there are high powered contracts (and income is unequally distributed) and punishments are harsh. Economists who believe that deterrence (rather than retribution) shapes punishment can interpret the meanness parameter as pessimism about future economic opportunities and verify that two similar equilibria emerge.
    Keywords: beliefs; multiple equilibria; illegal behavior; fines; sentences.
    JEL: K42 K14 E62 P16
    Date: 2006–10
  24. By: Kari E.O. Alho
    Keywords: economic reform, EU, political myopia
    JEL: E20 H30
    Date: 2006–11–09
  25. By: Hartmann, Daniel; Pierdzioch, Christian
    Abstract: Empirical evidence suggests that the link between exchange rate movements and stock returns may be nonlinear. This evidence could reflect fundamental economic effects like, for example, transaction costs in international goods market arbitrage. It could also reflect market inefficiencies if investors could exploit the nonlinearity to systematically improve the performance of simple trading rules. Using monthly data for major North-American and European industrial countries for the period 1973-2006, we found that it would have been difficult for an investor to use information on nonlinearities to improve the performance of a simple trading rule based on out-of-sample forecasts of stock returns.
    Keywords: Stock returns; exchange rate movements; nonlinearities
    JEL: C53 F37 E44
    Date: 2006–09
    Abstract: A considerable number of Western European banks have acquired banks in Central and Eastern Europe from the mid-1990s onwards. The question is whether or not this will improve the efficiency and profitability of the Central and Eastern European banking sectors. We test the relative strength of the efficiency versus the market power hypotheses by investigating the bank-specific characteristics of the banks involved in the cross-border acquisitions. We also examine the determinants of the post-acquisition target banks’ performance. Our results indicate that large Western European banks have targeted relatively large and efficient CEEC banks with an established presence in their local retail banking markets. We find no evidence that cross-border bank acquisitions in the CEEC are driven by efficiency motivations. The evidence supports the market power hypothesis, raising concerns about the optimal balance between foreign ownership and competition.
    Keywords: Mergers and acquisitions, cross-border acquisitions, bank efficiency, transition economies, Central and Eastern Europe
    JEL: C30 E44 F21 G21
    Date: 2006–09
  27. By: Hartmann, Daniel; Pierdzioch, Christian
    Abstract: We examined the link between international equity flows and U.S. stock returns. Based on the results of tests of in-sample and out-of-sample predictability of stock returns, we found evidence of a strong positive (negative) link between international equity flows and contemporaneous (one-month-ahead) stock returns. Our results also indicate that an investor, in real time, could have used information on the link between international equity flows and one-month-ahead stock returns to improve the performance of simple trading rules.
    Keywords: International equity flows; predictability of stock returns; performance of trading rules; the United States
    JEL: G11 E44 F32
    Date: 2006–02

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