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Monetary Policy and the Stock Market: Some International evidence

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  • Christos Ioannidis
  • Alexandros Kontonikas

Abstract

This paper investigates the impact of monetary policy on stock returns in thirteen OECD countries over the period 1972-2002. Our results indicate that monetary policy shifts significantly affect stock returns, thereby supporting the notion of monetary policy transmission via the stock market. Our contribution with respect to previous work is threefold. First, we show that our findings are robust to various alternative measures of stock returns. Second, our inferences are adjusted for the non-normality exhibited by the stock returns data. Finally, we take into account the increasing co-movement among international stock markets. The sensitivity analysis indicates that the results remain largely unchanged.

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File URL: http://www.gla.ac.uk/media/media_219105_en.pdf
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Bibliographic Info

Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2006_12.

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Date of creation: Sep 2006
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Handle: RePEc:gla:glaewp:2006_12

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  1. Nelson, Edward, 2001. "UK Monetary Policy 1972-97: A Guide Using Taylor Rules," CEPR Discussion Papers 2931, C.E.P.R. Discussion Papers.
  2. Cecchetti, Stephen G. & Kashyap, Anil K, 1996. "International cycles," European Economic Review, Elsevier, vol. 40(2), pages 331-360, February.
  3. Cassola, Nuno & Morana, Claudio, 2004. "Monetary policy and the stock market in the euro area," Journal of Policy Modeling, Elsevier, vol. 26(3), pages 387-399, April.
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Cited by:
  1. Moayedi, Vafa & Aminfard, Matin, 2011. "The Impact of Policy Shocks on Financial Structure: Empirical Results from Japan," MPRA Paper 39185, University Library of Munich, Germany.
  2. Qayyum, Abdul & Anwar, Saba, 2011. "Impact of Monetary Policy on the Volatility of Stock Market in Pakistan," MPRA Paper 31188, University Library of Munich, Germany.
  3. Sirucek, Martin, 2013. "Impact of money supply on stock bubbles," MPRA Paper 51476, University Library of Munich, Germany.

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