Bank lending and the stock market's response to monetary policy shocks
AbstractThis paper explores whether a limited participation model modified to include features of the bank lending channel can account for the empirically observed reaction of stock market returns to monetary policy shocks. When calibrated to match characteristics of US data, the model generates responses that broadly match the empirical counterparts. The results also suggest, that the higher exposure of bank-dependent firms to liquidity shocks generates substantial heterogeneity of the responses across firms.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Economics & Finance.
Volume (Year): 17 (2008)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/inca/620165
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- Tsai, Chun-Li, 2014. "The effects of monetary policy on stock returns: Financing constraints and â€œinformativeâ€ and â€œuninformativeâ€ FOMC statements," International Review of Economics & Finance, Elsevier, Elsevier, vol. 29(C), pages 273-290.
- Tang, Yong & Luo, Yong & Xiong, Jie & Zhao, Fei & Zhang, Yi-Cheng, 2013. "Impact of monetary policy changes on the Chinese monetary and stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4435-4449.
- Hoxha, Indrit, 2013. "The market structure of the banking sector and financially dependent manufacturing sectors," International Review of Economics & Finance, Elsevier, Elsevier, vol. 27(C), pages 432-444.
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