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The Influence of Monetary Policy on Equity and Volatility Indices in the U.S. and Canada

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  • Robert Killins

Abstract

This paper investigates the reaction of equity and volatility indices in the U.S. and Canada to changes in monetary policy by each respective country. The results confirm previous literature that suggests contractionary changes in monetary policy in the U.S. results in downward pressure on U.S. equity indices. Additionally, this research finds that monetary policy changes do not have any significant impact on the volatilely index in the U.S. (VIX). The results from the Canadian data show a much different picture. Contractionary changes of monetary policy in both Canada and the U.S. seem to drive Canadian equity markets in an upward manner. These monetary policy shocks also have a significant impact on volatilely indices in Canada. This research documents the dynamic relationship monetary policy has on equity markets in the U.S. and Canada.

Suggested Citation

  • Robert Killins, 2016. "The Influence of Monetary Policy on Equity and Volatility Indices in the U.S. and Canada," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 132-145, April.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:4:p:132-145
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    References listed on IDEAS

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    2. Bakshi, Gurdip S & Chen, Zhiwu, 1996. "Inflation, Asset Prices, and the Term Structure of Interest Rates in Monetary Economies," The Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 241-275.
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    5. Jean-Marie Dufour & David Tessier, 2006. "Short-Run and Long-Run Causality between Monetary Policy Variables and Stock Prices," Staff Working Papers 06-39, Bank of Canada.
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    More about this item

    Keywords

    monetary policy; volatilily; equity;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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