Monetary policy and stock prices – Cross-country evidence from cointegrated VAR models

Belke, Ansgar; Beckmann, Joscha

doi:10.1016/j.jbankfin.2014.12.004

Cited by 34 publications

(18 citation statements)

References 26 publications

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“…Abouwafia and Chambers (2015) study the interdependence between monetary policy and stock prices in 5 economies of the Middle East and report heterogeneity in their interaction. Belke and Beckmann (2015) use the Cointegrated VAR model to study the long-run relationships and short-run dynamics of monetary policy and equity market interaction in 5 advanced and 3 emerging economies and find different patterns and causalities for these economies. They find a direct relationship of monetary policy on stock prices in the long run for 3 out of 8 economies including the US, Thailand and Brazil, while significant short-run dynamics are hardly identified.…”

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confidence: 99%

“…They find a direct relationship of monetary policy on stock prices in the long run for 3 out of 8 economies including the US, Thailand and Brazil, while significant short-run dynamics are hardly identified. Apart from Belke and Beckmann (2015), no other study has analyzed long-run equilibrium relationships and short-run dynamics of monetary policy and stock price.…”

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confidence: 99%

“…Stock markets being highly sensitive to monetary policy actions, it is worthwhile to study the relationship between monetary policy and stock prices as it can help in understanding monetary policy transmission mechanism and formulating effective policy decisions. To the best of our knowledge, there is a lack of comprehensive evidence in the literature on long-run relationships and short-run dynamics of monetary policy and stock market interaction, except the study by Belke and Beckmann (2015) which focuses on 5 advanced and 3 emerging economies. Further, most of the previous studies have not analyzed the relationship between monetary policy and stock prices On Monetary Policy and Stock Price Relationship: Long and Short-run Dynamics…”

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confidence: 99%

“…In this light, this paper aims to study the relationship between monetary policy and stock prices from January 1999 to December 2017 by exploring their long-run equilibrium relationships and short-run dynamics by employing Structural Cointegrated Vector-Autoregressive (VAR) model. We consider a wider selection of economies as compared to Belke and Beckmann (2015) as our analysis is based on a total of 15 economies, out of which 7 are advanced and 8 are emerging economies. We contribute to the literature by undertaking a systematic analysis of their relationship in both short and long term for a larger set of major developed and developing economies.…”

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On Monetary Policy and Stock Price Relationship: Long and Short-run Dynamics

Saini

Sehgal²

2020

RIJBR

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In this paper, we investigate the relationship between monetary policy and stock prices across advanced and emerging economies from January 1999 to December 2017. We also examine the impact of global monetary policy on the sample stock markets. Using the Structural Cointegrated Vector-Autoregressive model, we explore long-run equilibrium relationship and short-run dynamics of monetary policy and stock markets before and after the global financial crisis. Our results demonstrate that domestic policy rate and stock prices are often not tied together in long-term equilibrium relationships for a majority of the economies. Cross-sectional heterogeneity is observed as the relationship differs in terms of sign, magnitude and adjustment dynamics. Further, US monetary conditions are found to play an important role in influencing global output or liquidity conditions. Short-run dynamics reveal a positive impact of expansionary monetary policy shock on equity prices in those economies where transmission mechanism of monetary policy is weak. Further, we find limited response of central banks to domestic equity price shocks. The influence of US monetary policy shocks in driving equity prices is also found to be insignificant for a majority of the economies.

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confidence: 99%

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On Monetary Policy and Stock Price Relationship: Long and Short-run Dynamics

Saini

Sehgal²

2020

RIJBR

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“…Thus, one can use the innovative formulation to model the deterministic terms in the process by taking into account the dynamics of the model. Applications including broken trends and several types of dummy variables are also given in, for example, Doornik, Hendry, and Nielsen (1998), Hendry and Juselius (2001), Juselius (2006Juselius ( , 2009, and Belke and Beckmann (2015). For an application using various dummies, including a "volcanic function"dummy variable for modeling volcanic eruptions, see Model V of Pretis (2015) and also Pretis et al (2016) for the de…nition of the volcanic function.…”

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confidence: 99%

The Cointegrated Vector Autoregressive Model with General Deterministic Terms

Johansen

Nielsen

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn the cointegrated vector autoregression (CVAR) literature, deterministic terms have until now been analyzed on a case-by-case, or as-needed basis. We give a comprehensive uni…ed treatment of deterministic terms in the additive model X t = Z t + Y t , where Z t belongs to a large class of deterministic regressors and Y t is a zero-mean CVAR. We suggest an extended model that can be estimated by reduced rank regression and give a condition for when the additive and extended models are asymptotically equivalent, as well as an algorithm for deriving the additive model parameters from the extended model parameters. We derive asymptotic properties of the maximum likelihood estimators and discuss tests for rank and tests on the deterministic terms. In particular, we give conditions under which the estimators are asymptotically (mixed) Gaussian, such that associated tests are 2 -distributed.

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Impacts of supply and demand shocks on abnormal fluctuation of stock price: An analysis of US–China trade friction

Li,

Wei,

Jiang

2024

Manage Decis Econ

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This paper aims to study the impact of supply and demand shocks on abnormal fluctuation of stock price. We use event study and regression analysis methods to explain why the supply and demand shocks caused by US–China trade friction in targeting industries can affect the whole Chinese securities market. Our findings reveal a direct effect of shocks that can affect the stock prices of targeted companies. Additionally, there is a network effect in which the supply side and demand side shocks propagate upstream and downstream through the network, in turn affecting the stock prices of nontargeted companies.

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Monetary policy and stock prices – Cross-country evidence from cointegrated VAR models

Cited by 34 publications

References 26 publications

On Monetary Policy and Stock Price Relationship: Long and Short-run Dynamics

On Monetary Policy and Stock Price Relationship: Long and Short-run Dynamics

The Cointegrated Vector Autoregressive Model with General Deterministic Terms

Impacts of supply and demand shocks on abnormal fluctuation of stock price: An analysis of US–China trade friction

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