Do stock markets lead or lag macroeconomic variables? Evidence from select European countries

Silvio John Camilleri*, Nicolanne Scicluna, Ye Bai

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

32 Citations (Scopus)


This study examines the connections between stock prices and key macroeconomic indicators: inflation, industrial production, interest rates, money supply and select interactions between the latter group of variables. Such links are evaluated through vector-autoregressions (VARs) on monthly data spanning over the period 1999–2017, for Belgium, France, Germany, Netherlands and Portugal. We check whether such relations are confirmed across different sub-periods and also adopt a non-parametric approach by using a Pesaran-Timmermann test. We find different contemporaneous and lead-lag relationships between stock prices and the selected variables, although there are variations across countries. VAR models indicate that stock prices significantly lead inflation across all countries during the sample period and in most cases this relationship was positive. In addition, stock prices significantly lead industrial production in four of the sampled countries and these relationships were positive as well. Contrary to long-established finance theories, we did not find numerous significant links between interest rates and stock indices; however the interaction between interest rates and money supply was a leading indicator of stock prices in France, Germany and Portugal.

Original languageEnglish
Pages (from-to)170-186
Number of pages17
JournalNorth American Journal of Economics and Finance
Publication statusPublished - Apr 2019


  • Macroeconomic indicators
  • Pesaran-Timmermann test
  • Stock prices
  • Structural breakpoint tests
  • Vector autoregression


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