Stock Prices and Monetary Policy - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Stock Prices and Monetary Policy write by Paul De Grauwe. This book was released on 2008. Stock Prices and Monetary Policy available 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.
Identifying the Interdependence Between US Monetary Policy and the Stock Market
Identifying the Interdependence Between US Monetary Policy and the Stock Market - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Identifying the Interdependence Between US Monetary Policy and the Stock Market write by Hilde C. Bjørnland. This book was released on 2010. Identifying the Interdependence Between US Monetary Policy and the Stock Market available 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.
U.S. Monetary Shocks and Global Stock Prices
U.S. Monetary Shocks and Global Stock Prices - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook U.S. Monetary Shocks and Global Stock Prices write by Mr.Luc Laeven. This book was released on 2010-12-01. U.S. Monetary Shocks and Global Stock Prices available 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.
Learning, Monetary Policy and Asset Prices
Learning, Monetary Policy and Asset Prices - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Learning, Monetary Policy and Asset Prices write by Mr.Marco Airaudo. This book was released on 2015-01-23. Learning, Monetary Policy and Asset Prices available in PDF, EPUB and Kindle. We explore the stability properties of interest rate rules granting an explicit response to stock prices in a New-Keynesian DSGE model populated by Blanchard-Yaari non-Ricardian households. The constant turnover between long-time stock holders and asset-poor newcomers generates a financial wealth channel where the wedge between current and expected future aggregate consumption is affected by the market value of financial wealth, making stock prices non-redundant for the business cycle. We find that if the financial wealth channel is sufficiently strong, responding to stock prices enlarges the policy space for which the rational expectations equilibrium is both determinate and learnable (in the E-stability sense of Evans and Honkapohja, 2001). In particular, the Taylor principle ceases to be necessary and also mildly passive policy responses to inflation lead to determinacy and E-stability. Our results appear to be more prominent in economies characterized by a lower elasticity of substitution across differentiated products and/or more rigid labor markets.
The Stock Market Channel of Monetary Policy
The Stock Market Channel of Monetary Policy - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook The Stock Market Channel of Monetary Policy write by Mr.Ralph Chami. This book was released on 1999-02-01. The Stock Market Channel of Monetary Policy available 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.
