Does stock market uncertainty impair the use of monetary indicators in the euro area?
The relationship between monetary indicators and inflation is ussually assumed to be linear, implying that looser monetary conditions always signal an increase in in.ation. Recently, money growth in the euro area surged while inflation remained comparatively subdued. This seems at variance with linearity. At the same time, stock market uncertainty peaked, suggesting that part of the money growth resulted from portfolio adjustment and was hence non-inflationary. We employ a threshold regression model to verify the claim that the impact of monetary indicators on future inflation varies conditional on stock price volatility. We show that there is limited evidence to support this claim. On the other hand, our results indicate that stock market data may contain useful information regarding future inflation.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Dec 2003|
|Contact details of provider:|| Postal: Postbus 98, 1000 AB Amsterdam|
Web page: http://www.dnb.nl/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Y. Campbell, 2001.
"Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk,"
Journal of Finance,
American Finance Association, vol. 56(1), pages 1-43, 02.
- Malkiel, Burton & Campbell, John & Lettau, Martin & Xu, Yexiao, 2001. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," Scholarly Articles 3128707, Harvard University Department of Economics.
- John Y. Campbell & Martin Lettau & Burton G. Malkiel & Yexiao Xu, 2000. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," NBER Working Papers 7590, National Bureau of Economic Research, Inc.
- Gunter Coenen & Juan Luis Vega, 2000.
"The Demand for M3 in the Euro Area,"
Econometric Society World Congress 2000 Contributed Papers
0976, Econometric Society.
- Durlauf, Steven N & Johnson, Paul A, 1995.
"Multiple Regimes and Cross-Country Growth Behaviour,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 10(4), pages 365-384, Oct.-Dec..
- Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers 9419r, Wisconsin Madison - Social Systems.
- Durlauf, S.N. & Johnson, P.A., 1994. "Multiple Regimes and Cross-Country Growth Behavior," Working papers 9419, Wisconsin Madison - Social Systems.
- Barberis, Nicholas & Thaler, Richard, 2003.
"A survey of behavioral finance,"
Handbook of the Economics of Finance,
in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 18, pages 1053-1128
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Heiko Ebens, 2000.
"The Distribution of Stock Return Volatility,"
Center for Financial Institutions Working Papers
00-27, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Milbourne, Ross D, 1987. "Re-examining the Buffer-Stock Model of Money," Economic Journal, Royal Economic Society, vol. 97(388a), pages 130-142, Supplemen.
- Tsionas, Efthymios G. & Christopoulos, Dimitris K., 2003. "Maastricht convergence and real convergence: European evidence from threshold and smooth transition regression models," Journal of Policy Modeling, Elsevier, vol. 25(1), pages 43-52, January.
- Issing,Otmar & Gaspar,Vitor & Angeloni,Ignazio & Tristani,Oreste, 2001.
"Monetary Policy in the Euro Area,"
Cambridge University Press, number 9780521788885, December.
- Bruce E. Hansen, 2000.
"Sample Splitting and Threshold Estimation,"
Econometric Society, vol. 68(3), pages 575-604, May.
- Sellin, Peter, 2001. " Monetary Policy and the Stock Market: Theory and Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 15(4), pages 491-541, September.
- Zenon Kontolemis, 2002. "Money Demand in the Euro Area; Where Do We Stand (Today)?," IMF Working Papers 02/185, International Monetary Fund.
- Andersen, Torben G & Bollerslev, Tim, 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 885-905, November.
- LG Deidda & B. Fattouh, 2001.
"Non linearity between finance and growth,"
Working Paper CRENoS
200104, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- Brand, Claus & Cassola, Nuno, 2000. "A money demand system for euro area M3," Working Paper Series 0039, European Central Bank.
- Hansen, B.E., 1991.
"Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis,"
RCER Working Papers
296, University of Rochester - Center for Economic Research (RCER).
- Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-430, March.
- Warne, Anders & Bruggeman, Annick & Donati, Paola, 2003. "Is the demand for euro area M3 stable?," Working Paper Series 0255, European Central Bank.
- Choi, Woon Gyu & Oh, Seonghwan, 2003. " A Money Demand Function with Output Uncertainty, Monetary Uncertainty, and Financial Innovations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 685-709, October.
- Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
- Nicoletti-Altimari, Sergio, 2001. "Does money lead inflation in the euro area?," Working Paper Series 0063, European Central Bank.
- Boyle, Glenn W & Peterson, James D, 1995. "Monetary Policy, Aggregate Uncertainty, and the Stock Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 570-582, May.
- 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.
- Cassola, Nuno & Morana, Claudio, 2002. "Monetary policy and the stock market in the euro area," Working Paper Series 0119, European Central Bank.
- Arturo Estrella & Frederic S. Mishkin, 1996.
"Is There a Role for Monetary Aggregates in the Conduct of Monetary Policy?,"
NBER Working Papers
5845, National Bureau of Economic Research, Inc.
- Estrella, Arturo & Mishkin, Frederic S., 1997. "Is there a role for monetary aggregates in the conduct of monetary policy?," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 279-304, October.
- Boudoukh, Jacob & Richardson, Matthew, 1993. "Stock Returns and Inflation: A Long-Horizon Perspective," American Economic Review, American Economic Association, vol. 83(5), pages 1346-1355, December.
- George Loewenstein, 2000. "Emotions in Economic Theory and Economic Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 426-432, May.
- Joaquim Vieira Ferreira Levy & Alessandro Calza & Dieter Gerdesmeier, 2001. "Euro Area Money Demand; Measuring the Opportunity Costs Appropriately," IMF Working Papers 01/179, International Monetary Fund.
- Savvides, Andreas & Stengos, Thanasis, 2000.
"Income inequality and economic development: evidence from the threshold regression model,"
Elsevier, vol. 69(2), pages 207-212, November.
- Savvides, A. & Stengos, T., 2000. "Income Inequality and Economic Development: Evidence from the Threshold Regression Model," Working Papers 2000-2, University of Guelph, Department of Economics and Finance.
- Hong Liu & Mark Loewenstein, 2002. "Optimal Portfolio Selection with Transaction Costs and Finite Horizons," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 805-835.
When requesting a correction, please mention this item's handle: RePEc:dnb:mebser:2003-15. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet)
If references are entirely missing, you can add them using this form.