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Stock market responses to unconventional monetary policy shocks

Author

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  • Wang, Jialing
  • Eom, Young Ho
  • Jang, Woon Wook

Abstract

We assess the impact of forward guidance and large-scale asset purchases (LSAPs) on stock market returns, finding that LSAP shocks during unconventional periods affect stock returns in a manner similar to federal funds rate (FFR) shocks during conventional periods.

Suggested Citation

  • Wang, Jialing & Eom, Young Ho & Jang, Woon Wook, 2024. "Stock market responses to unconventional monetary policy shocks," Economics Letters, Elsevier, vol. 244(C).
    • Handle: RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524004300
    DOI: 10.1016/j.econlet.2024.111946
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    References listed on IDEAS

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    1. Ben S. Bernanke & Kenneth N. Kuttner, 2005. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," Journal of Finance, American Finance Association, vol. 60(3), pages 1221-1257, June.
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    6. Lakdawala, Aeimit & Schaffer, Matthew, 2019. "Federal reserve private information and the stock market," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 34-49.
    7. Swanson, Eric T., 2021. "Measuring the effects of federal reserve forward guidance and asset purchases on financial markets," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 32-53.
    8. Campbell, John Y & Ammer, John, 1993. "What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns," Journal of Finance, American Finance Association, vol. 48(1), pages 3-37, March.
    9. John H. Rogers & Chiara Scotti & Jonathan H. Wright, 2018. "Unconventional Monetary Policy and International Risk Premia," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(8), pages 1827-1850, December.
    10. Maurer, Tim D. & Nitschka, Thomas, 2023. "Stock market evidence on the international transmission channels of US monetary policy surprises," Journal of International Money and Finance, Elsevier, vol. 136(C).
    11. Eric T. Swanson, 2024. "The Macroeconomic Effects of the Federal Reserve’s Conventional and Unconventional Monetary Policies," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(3), pages 1152-1184, September.
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    More about this item

    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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