Econometric Models of the Secular Stagnation Influence on the World Stock Indexes

The current research is undertaken for the evaluation of the secular stagnation (SS) influence on the world stock indexes. The problem of the SS effect is relatively more evident for the developed financial markets. Therefore, I have chosen G7 and particularly the US stock indexes in order to provide conclusions on the conceivable slowdown. My previous research, having been based on the linear models’ estimates, has not revealed any substantial expected stagnation influence. The new research undertaken has provided sufficient consistent results; it has mainly considered three questions: the nonlinear econometrics models to be used for the SS influence to be revealed; the tests to be implemented in order to estimate the adequacy of the models in use, and the average expected stock markets’ slowdown. Firstly, I have derived 5 VAR models by considering different factors, based on real GDP/IPI, to give the most reliable estimate. Three models, having been applied to the data, have provided an evidence of the stock market slowdown. The statistics have been tested for normality and consistency. The model with CPI factor has provided stronger evidence on the SS effect on the stock market. Finally, I have estimated the conceivable slowdown for the rest of G7 by applying the CAPM model.