The Nexus between Stock Indices and Bond Yields in the Recent Hyperinflation Era in Venezuela

The aim of this paper is to cast light on the relation between the Bursatil Financial (IBCF) stock index and the long-term (15-year) and longer-term (20-year) government bond yields in Venezuela during the recent hyperinflationary period that was set off in 2009. Weekly data are used and a Vector Error Correction Model specification is employed in order to examine the nexus between the Venezuelan financial sector and the real economy. Results provide evidence of a negative and statistically significant dependence of the stock index by the 15-year and the 20-year government bond yield, whereas the relation the other way round is also negative but weak and non-significant.