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The Impact of Monetary Policy Shocks on Stock Prices: Evidence from Canada and the United States

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  • Yun Daisy Li
  • Talan B. Iscan
  • Kuan Xu

    () (Department of Economics, University of Western Ontario
    Department of Economics, Dalhousie University
    Department of Economics, Dalhousie University)

Abstract

Using structural VAR models with short-run restrictions appropriate for Canada and the United States, we empirically examine whether trade and financial market openness matter for the impact on and transmission to stock prices of monetary policy shocks. We find that, in Canada, the immediate response of stock prices to a domestic contractionary monetary policy shock is small and the dynamic response is brief, whereas in the United States, the immediate response of stock prices to a similar shock is relatively large and the dynamic response is relatively prolonged. We find that these differences are largely driven by differences in financial market openness and hence different dynamic responses of monetary policy shocks between the two countries that we model in this paper.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Yun Daisy Li & Talan B. Iscan & Kuan Xu, 2007. "The Impact of Monetary Policy Shocks on Stock Prices: Evidence from Canada and the United States," Department of Economics at Dalhousie University working papers archive stock_money19.pdf, Dalhousie, Department of Economics.
  • Handle: RePEc:dal:wparch:stock_money19.pdf
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    Keywords

    monetary policy shocks; stock prices; open economy; structural vector autoregressive model;

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