Monetary Policy And Stock Price Returns PDF Download
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Author | : Paul De Grauwe |
Publisher | : CEPS |
Total Pages | : 22 |
Release | : 2008 |
Genre | : Monetary policy |
ISBN | : 929079819X |
Download Stock Prices and Monetary Policy Book in PDF, ePub and Kindle
The question of whether central banks should target stock prices so as to prevent bubbles and crashes from occurring has been hotly debated. This paper analyses this question using a behavioural macroeconomic model. This model generates bubbles and crashes. It analyses how 'leaning against the wind' strategies, which aim to reduce the volatility of stock prices, can help in reducing volatility of output and inflation. We find that such policies can be effective in reducing macroeconomic volatility, thereby improving the trade-off between output and inflation variability. The strength of this result, however, depends on the degree of credibility of the inflation-targeting regime. In the absence of such credibility, policies aiming at stabilising stock prices do not stabilise output and inflation.
Author | : Hilde C. Bjørnland |
Publisher | : |
Total Pages | : 0 |
Release | : 2010 |
Genre | : |
ISBN | : |
Download Identifying the Interdependence Between US Monetary Policy and the Stock Market Book in PDF, ePub and Kindle
We estimate the interdependence between US monetary policy and the S&P 500 using structural VAR methodology. A solution is proposed to the simultaneity problem of identifying monetary and stock price shocks by using a combination of short-run and long-run restrictions that maintains the qualitative properties of a monetary policy shock found in the established literature (CEE 1999). We find great interdependence between interest rate setting and stock prices. Stock prices immediately fall by 1.5 per cent due to a monetary policy shock that raises the federal funds rate by ten basis points. A stock price shock increasing stock prices by one per cent leads to an increase in the interest rate of five basis points. Stock price shocks are orthogonal to the information set in the VAR model and can be interpreted as non-fundamental shocks. We attribute a major part of the surge in stock prices at the end of the 1990s to these non-fundamental shocks.
Author | : Mr. Zhongxia Zhang |
Publisher | : International Monetary Fund |
Total Pages | : 59 |
Release | : 2021-08-20 |
Genre | : Business & Economics |
ISBN | : 1513586750 |
Download Stock Returns and Inflation Redux: An Explanation from Monetary Policy in Advanced and Emerging Markets Book in PDF, ePub and Kindle
Classical theories of monetary economics predict that real stock returns are negatively correlated with inflation when monetary policy is countercyclical. Previous empirical studies mostly focus on a small group of developed countries or a few countries with hyperinflation. In this paper, I examine the stock return-inflation relation under different monetary policy regimes and conditions using an expanded dataset of 71 economies. Empirical evidence suggests that the stock return-inflation relation is partially driven by monetary policy. If a country’s monetary authority conducts a more countercyclical monetary policy, the stock return-inflation relation becomes more negative. In addition, the results differ by monetary policy framework. In exchange rate anchor countries, stock markets do not respond to monetary policy cyclicality. In inflation targeting countries, stock markets react more strongly to inflation. A key contribution of this paper is to classify inflation targeters by their behaviors, and illustrate that behavior matters in shaping market perceptions: markets react to inflation and monetary policy cyclicality when central banks are able to control inflation within their target bands. In this case markets are sensitive to inflation dynamics when inflation is above the announced target bands. Finally, when monetary policy is constrained by the Zero Lower Bound (ZLB), a structural break is introduced and real stock returns no longer respond to inflation and monetary policy cyclicality.
Author | : David C. Colander |
Publisher | : Routledge |
Total Pages | : 233 |
Release | : 2015-02-24 |
Genre | : Business & Economics |
ISBN | : 1317458303 |
Download The Art of Monetary Policy Book in PDF, ePub and Kindle
Offering an introduction to the Japanese political system, this book covers the end of the Koizumi era, the brief and troubled premiership of Abe, and the selection of Fukuda as prime minister. It includes material on "bubble" and "post-bubble" economic developments, as well as coverage of health care policy.
Author | : J. Benson Durham |
Publisher | : |
Total Pages | : |
Release | : 2005 |
Genre | : |
ISBN | : |
Download More on Monetary Policy and Stock Price Returns Book in PDF, ePub and Kindle
Recent research suggests a persistent empirical relation between U.S. monetary policy and stock returns since the mid-1980s. The findings seem questionable and incomplete, however, for at least three reasons. First, the results are sensitive to sample selection. Second, this research does not distinguish between anticipated and unanticipated monetary policy decisions. Third, such analysis does not satisfactorily consider that returns and policy are probably determined simultaneously because prices contain information about market expectations for the economy and, in turn, policy. Together, these issues suggest that investors are unlikely to profit from strategies based on past or anticipated Federal Reserve decisions.
Author | : Mr.Ralph Chami |
Publisher | : International Monetary Fund |
Total Pages | : 26 |
Release | : 1999-02-01 |
Genre | : Business & Economics |
ISBN | : 145184395X |
Download The Stock Market Channel of Monetary Policy Book in PDF, ePub and Kindle
This paper argues that the stock market is an important channel of monetary policy. Monetary policy affects real economic activity because inflation levies a property tax on stocks in addition to an income tax on dividend payments. Inflation thus taxes stocks more heavily than it does bonds. Households alter their required rate of return as inflation changes, and firms adjust production in order to satisfy their shareholders’ demands. As the stock market channel grows in importance, the appropriate intermediate target for the central bank is the price level, with price stability being the ultimate goal.
Author | : Jürgen von Hagen |
Publisher | : Springer Science & Business Media |
Total Pages | : 331 |
Release | : 2013-04-17 |
Genre | : Business & Economics |
ISBN | : 1475763905 |
Download Regional Aspects of Monetary Policy in Europe Book in PDF, ePub and Kindle
Monetary union has dawned in Europe. Now that the common currency is a reality, questions concerning the practical conduct of monetary policy in the European Monetary Union (EMU) are moving to the forefront of the policy debate. Among these, one of the most critical is how the new monetary union will cope with the large heterogeneity of its member economies. Given the large differences in economic and financial structures among the EMU member states, monetary policy is likely to affect different member economies in different ways. Regional Aspects of Monetary Policy in Europe collects the proceedings of an international conference held at the Center for European Integration Studies of the University of Bonn, dedicated to this issue. The contributions to this conference fall into two parts. The first part consists of empirical and theoretical studies of the regional effects of monetary policy in heterogeneous monetary unions. The second part consists of papers analyzing the political economy of monetary policy in a monetary union of heterogeneous regions or member states. The papers all support the conclusion that regional differences in the responses to a common monetary policy will make European monetary policy especially difficult in the years to come. Such differences arise from a variety of sources, and they cannot be expected to be mere teething troubles that will disappear after a while. Even if they were ignored in the run-up to the EMU, Europe's central bankers and economic policy makers will have to learn how to cope with such differences in the future.
Author | : Stephen Giovanni Cecchetti |
Publisher | : Centre for Economic Policy Research |
Total Pages | : 164 |
Release | : 2000 |
Genre | : Business & Economics |
ISBN | : 9781898128533 |
Download Asset Prices and Central Bank Policy Book in PDF, ePub and Kindle
Concludes the role of asset prices in monetary policy is one of the most important, and difficult, questions confronting central banks.
Author | : J. Benson Durham |
Publisher | : |
Total Pages | : 54 |
Release | : 2001 |
Genre | : Monetary policy |
ISBN | : |
Download The Effect of Monetary Policy on Monthly and Quarterly Stock Market Returns Book in PDF, ePub and Kindle
Author | : Mr.Luc Laeven |
Publisher | : International Monetary Fund |
Total Pages | : 30 |
Release | : 2010-12-01 |
Genre | : Business & Economics |
ISBN | : 1455210854 |
Download U.S. Monetary Shocks and Global Stock Prices Book in PDF, ePub and Kindle
This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for sectors that depend on external financing, and for countries that are more integrated with the global financial market. These findings suggest that financial frictions play an important role in the transmission of monetary policy, and that U.S. monetary policy influences global capital allocation.