TY  - JOUR
AU  - Shapiro,Matthew D.
TI  - The Stabilization of the U.S. Economy Evidence From the Stock Market
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2645
PY  - 1988
Y2  - July 1988
UR  - http://www.nber.org/papers/w2645
L1  - http://www.nber.org/papers/w2645.pdf
N1  - Author contact info:
Matthew D. Shapiro
Department of Economics
University of Michigan
611 Tappan St
Ann Arbor, MI 48109-1220
Tel: 734/764-5419
Fax: 734 764-2769
E-Mail: shapiro@umich.edu
AB  - Until recently, economists widely believed that economic activity had become less variable in the United States following the end of World War II. Challenging this belief, new research suggests that key historical time series are spuriously volatile, a finding that is highly controversial. Data from the stock market may provide a vehicle for resolving the controversy. Economic theory relates stock prices to real activity; empirical tests also show a strong link between stock prices and activity. Financial data are accurately measured over long spans of time and hence are free of most of the measurement problems in other time series. Measures of stock prices show no stabilization in the post-World War II period relative to the pre-World War I or pre-Depression periods. These stock market data thus support the hypothesis that real activity has not been stabilized.
ER  -