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Time-varying Granger causality between the stock market and unemployment in the United States

Author

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  • Vincent Fromentin

    (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

Abstract

In this paper, we look at the connection between the stock market and the unemployment rate in the United States. Using a recent time-varying Granger causality framework covering the period from January 1960 to October 2020, tests reveal that lagged realizations of the stock market have predictive power regarding unemployment, and vice et versa, but that the predictive ability only occurs sporadically over time, particularly during ‘crash' periods. These results are in line with the literature on the information spillover between finance markets and the real-life economy, with changes of causality across time.

Suggested Citation

  • Vincent Fromentin, 2021. "Time-varying Granger causality between the stock market and unemployment in the United States," Post-Print hal-03451701, HAL.
    • Handle: RePEc:hal:journl:hal-03451701
    DOI: 10.1080/13504851.2021.1987378
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    Cited by:

    1. Chevaughn van der Westhuizen & Renee van Eyden & Goodness C. Aye, 2022. "Is Inflation Uncertainty a Self-Fulfilling Prophecy? The Inflation-Inflation Uncertainty Nexus and Inflation Targeting in South Africa," Working Papers 202254, University of Pretoria, Department of Economics.
    2. Fromentin, Vincent, 2022. "Time-varying causality between stock prices and macroeconomic fundamentals: Connection or disconnection?," Finance Research Letters, Elsevier, vol. 49(C).

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