The declining explanatory power of interest rates for stock market and business cycle dynamics
Abstract
This study applies a multivariate wavelet framework to examine the time-varying relationship between stock market cycles and business cycles in Germany, Japan, the UK, and the USA from 2000 to 2025. Prior to 2020, stock market cycles generally led business cycles at medium- to longterm frequencies. Around 2020, this pattern reversed, indicating a structural shift. Controlling for key interest rates reduces regions of significant coherence during the Global Financial Crisis, but not around 2020, suggesting a diminished role of interest rates in explaining the joint dynamics of stock markets and business cycles in recent years.
Fields of Study & Subjects
Monetary Policy and Economic Impact
Market Dynamics and Volatility
Financial Markets and Investment Strategies
Publication details
- Journal / source
- Finance research letters
- Volume
- 91
- Pages
- 109524–109524
- Publication date
- 15 January 2026
- Language
- EN