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When do stock market booms occur? the macroeconomic and policy environments of 20th century booms

  • Michael D. Bordo
  • David C. Wheelock

This paper studies the macroeconomic conditions and policy environments under which stock market booms occurred among ten developed countries during the 20th Century. We find that booms tended to occur during periods of above-average growth of real output, and below-average and falling inflation. We also find that booms often ended within a few months of an increase in inflation and monetary policy tightening. The evidence suggests that booms reflect both real macroeconomic phenomena and monetary policy, as well as the extant regulatory environment.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2006-051.

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Date of creation: 2006
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Handle: RePEc:fip:fedlwp:2006-051
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  1. 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.
  2. Eugene White & Frederic Mishkin, 2002. "U.S.Stock Market Crashes and Their Aftermath: Implications for Monetary Policy," Departmental Working Papers 200208, Rutgers University, Department of Economics.
  3. Charles Calomiris & David Wheelock, 1998. "Was the Great Depression a Watershed for American Monetary Policy?," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 23-66 National Bureau of Economic Research, Inc.
  4. Obstfeld, Maurice & Taylor, Alan M., 1997. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," CEPR Discussion Papers 1633, C.E.P.R. Discussion Papers.
  5. William Goetzmann & Lingfeng Li & K. Rouwenhorst, 2001. "Long-Term Global Market Correlations," Yale School of Management Working Papers ysm237, Yale School of Management, revised 01 Jan 2008.
  6. DeLong, J. Bradford & Eichengreen, Barry, 1991. "The Marshall Plan: History's Most Successful Structural Adjustment Program," Department of Economics, Working Paper Series qt3b1108bj, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  7. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-61, May.
  8. Robert J. Gordon, 2000. "Does the "New Economy" Measure up to the Great Inventions of the Past?," NBER Working Papers 7833, National Bureau of Economic Research, Inc.
  9. Adrian R. Pagan & Kirill A. Sossounov, 2003. "A simple framework for analysing bull and bear markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 23-46.
  10. repec:cup:cbooks:9780521457385 is not listed on IDEAS
  11. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 145-169, March.
  12. Goodhart, Charles & Hofmann, Boris, 2000. "Do Asset Prices Help to Predict Consumer Price Inflation?," Manchester School, University of Manchester, vol. 68(0), pages 122-40, Supplemen.
  13. Larry Neal, 1998. "The financial crisis of 1825 and the restructuring of the British financial system," Review, Federal Reserve Bank of St. Louis, issue May, pages 53-76.
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