Abstract
In this paper, we investigate the argument that stock market is a barometer of economy in the context of cross-country effect between the U.S. and Japan. With grouped multivariate autoregressive model, Geweke linear dependence and spectral feedback between one country's stock market and the other country's macro economy was examined. A computing program for Geweke linear dependence and feedback spectrum of grouped VAR was developed and used. It is found that the U.S. stock market can be a barometer of Japanese economy in long run, while Japanese stock market's barometer effect to the U.S. economy is limited.
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