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| 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 | : 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 | : 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 | : 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.
| 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.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 | : 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 | : Dennis W. Jansen |
| Publisher | : |
| Total Pages | : 33 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
Download The Time Varying Effect of Monetary Policy Surprise on Stock Returns Book in PDF, ePub and Kindle
We study the time varying effects of monetary policy on the stock returns in order to capture changes in the effectiveness of monetary policy over time. We find that a one percentage point surprise federal funds rate increase decreases the one-day stock return by 1.33% during the period 1989 to 2000, and by 7.47% during the period 2001 to 2007, i.e., over five times more. Also, surprises of monetary policy announcements do not have significant effects on the stock returns for most of the 1990s, but have significant effects during the 2000s. The significant period coincides with higher transparency and greater efforts from the Federal Reserve to communicate with the public, especially in the grounds of future policy, i.e., forward guidance. Higher transparency could increase the effectiveness of monetary policy. At the same time, the insignificant period coincides with the period of stock prices' bubble. Recent work (Gali, 2014; Gali and Gambetti, 2015) has suggested that monetary policy might be ineffective during periods of bubbles. In order to distinguish between the two explanations, we explore the evolution effect of monetary policy surprise on bond returns. We find uniform response of bond returns before and after the 2000s. Thus, we conclude that our finding of low monetary policy effectiveness during the 1990s is specific to the stock market, making the theory of rational bubbles the prevailed explanation.
| Author | : Rifat Afrin |
| Publisher | : LAP Lambert Academic Publishing |
| Total Pages | : 76 |
| Release | : 2015-12-24 |
| Genre | : |
| ISBN | : 9783659817052 |
Download Sensitivity Analysis of Stock Market with Respect to Monetary Policy Book in PDF, ePub and Kindle
Monetary policy is that part of the macroeconomics, which attempts to achieve a set of objectives that are expressed in terms of several macroeconomic variables such as inflation, real output, money supply, exchange rate or employment. As a result, any change in the monetary policy will have an effect on these variables. For instance, monetary policy actions such as changes in the central bank discount rate may have an indirect effect on these variables. Therefore, it has been said that as broader financial markets are quick to incorporate new information, a more direct and contiguous effect of changes in the monetary policy instruments may be identified using financial data. Hence, in order to identify the monetary policy mechanism transmission into the stock market, understanding the sensitivity of stock market with respect to monetary policy is very important. This book examines whether current economic activities or more specifically the monetary policy tools of Bangladesh and India can explain stock market returns in short run and long-run horizon by using a number of multivariate tests.
