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Bank lending and the stock market's response to monetary policy shocks

Listed author(s):
  • Scharler, Johann

This 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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File URL: http://www.sciencedirect.com/science/article/pii/S1059-0560(07)00003-2
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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 17 (2008)
Issue (Month): 3 ()
Pages: 425-435

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Handle: RePEc:eee:reveco:v:17:y:2008:i:3:p:425-435
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620165

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  18. Ehrmann, Michael & Fratzscher, Marcel, 2004. "Taking stock: monetary policy transmission to equity markets," Working Paper Series 354, European Central Bank.
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