This paper analyzes the empirical interdependeciesamong asset returns, real activity, and inflation from multicountryand international points of view. We find that innovations in nominalstock returns are not significantly related to inflation or realactivity, that the U.S. term structure of interest rates predicts bothdomestic and foreign inflation rates and domestic future realactivity, and that innovations in inflation do not significantlyaffect real activity. An interpretation of the dynamics andsome policy implications of the results areprovided.