02280cam a22002777 4500001000600000003000500006005001700011008004100028100001900069245017400088260006600262490004100328500001900369520101900388530006101407538007201468538003601540690008801576690010101664700002201765700002401787710004201811830007601853856003701929856003601966w4275NBER20160728211405.0160728s1993 mau||||fs|||| 000 0 eng d1 aKonishi, Toru.10aStochastic Trends and Short-Run Relationships Between Financial Variables and Real Activityh[electronic resource] /cToru Konishi, Valerie A. Ramey, Clive W.J. Granger. aCambridge, Mass.bNational Bureau of Economic Researchc1993.1 aNBER working paper seriesvno. w4275 aFebruary 1993.3 aThis paper re-examines the relationship between financial variables and real activity in a unified statistical framework. Using the methods of cointegration and separation. we characterize the long-run and short-run relationships between three sets of variables and then use the framework to assess the predictive power of alternative financial variables for real activity. Three main results emerge from the analysis. First, we show that although two sets of variables may not share the long-run trend. the error correction terms from one set of variables may have important explanatory power for the variables in another set. Second, we show that some of the key variables discussed in the literature can be interpreted as error correction terms from another system. Third, comparing two key error correction terms, M2 velocity and the interest rate spread between commercial paper and Treasury bills, we find that M2 velocity appears to be a more consistent predictor of output than is the interest rate spread. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aE44 - Financial Markets and the Macroeconomy2Journal of Economic Literature class. 7aE47 - Forecasting and Simulation: Models and Applications2Journal of Economic Literature class.1 aRamey, Valerie A.1 aGranger, Clive W.J.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w4275.4 uhttp://www.nber.org/papers/w427541uhttp://dx.doi.org/10.3386/w4275