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Stock market booms and monetary policy in the twentieth century

  • Michael D. Bordo
  • David C. Wheelock

This article examines the association between stock market booms and monetary policy in the United States and nine other developed countries during the 20th century. The authors find, as was true of the U.S. stock market boom of 1994-2000, that booms typically arose during periods of above-average growth of real output and below-average inflation, suggesting that booms reflected both real macroeconomic phenomena and monetary policy. They find little evidence that booms were fueled by excessive liquidity. Booms often ended within a few months of an increase in inflation and consequent monetary policy tightening. They find few differences across the different monetary policy regimes of the century.

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File URL: http://research.stlouisfed.org/publications/review/07/03/BordoWheelock.pdf
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Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2007)
Issue (Month): Mar ()
Pages: 91-122

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Handle: RePEc:fip:fedlrv:y:2007:i:mar:p:91-122:n:v.89no.2
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  2. Michael F. Bryan & Stephen G. Cecchetti & Roisin O'Sullivan, 2002. "Asset Prices in the Measurement of Inflation," NBER Working Papers 8700, National Bureau of Economic Research, Inc.
  3. Michael D. Bordo & David C. Wheelock, 2004. "Monetary Policy and Asset Prices: A Look Back at Past U.S. Stock Market Booms," NBER Working Papers 10704, National Bureau of Economic Research, Inc.
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