This paper analyzes the empirical interdependecies
among asset returns, real activity, and inflation from multicountry
and international points of view. We find that innovations in nominal
stock returns are not significantly related to inflation or real
activity, that the U.S. term structure of interest rates predicts both
domestic and foreign inflation rates and domestic future real
activity, and that innovations in inflation do not significantly
affect real activity. An interpretation of the dynamics and
some policy implications of the results are
provided.