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Title:Interactions between the real economy and the stock market PDF Logo
Authors:Westerhoff, Frank
Issue Date:2011
Series/Report no.:BERG Working Paper Series 84
Abstract:We develop a simple behavioral macro model to study interactions between the real economy and the stock market. The real economy is represented by a Keynesian goods market approach while the setup for the stock market includes heterogeneous speculators. Using a mixture of analytical and numerical tools we find, for instance, that speculators may create endogenous boom-bust dynamics in the stock market which, by spilling over into the real economy, can cause lasting fluctuations in economic activity. However, fluctuations in economic activity may, by shaping the firms' fundamental values, also have an impact on the dynamics of the stock market.
Subjects:goods market
stock market
heterogeneous speculators
stability analysis
complex dynamics
JEL:D84
E12
G12
ISBN:978-3-931052-95-9
Document Type:Working Paper
Appears in Collections:BERG Working Paper Series, Universität Bamberg

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