IDEAS home Printed from https://ideas.repec.org/p/fip/fedlwp/2006-051.html

Some searches may not work properly. We apologize for the inconvenience.

   My bibliography  Save this paper

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

Author

Abstract

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.

Suggested Citation

  • Michael D. Bordo & David C. Wheelock, 2006. "When do stock market booms occur? the macroeconomic and policy environments of 20th century booms," Working Papers 2006-051, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:2006-051
    as

    Download full text from publisher

    File URL: http://research.stlouisfed.org/wp/2006/2006-051.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. J. Bradford De Long & Barry Eichengreen, 1991. "The Marshall Plan: History's Most Successful Structural Adjustment Program," NBER Working Papers 3899, National Bureau of Economic Research, Inc.
    2. Charles Goodhart & Boris Hofmann, 2000. "Do Asset Prices Help to Predict Consumer Price Inflation?," Manchester School, University of Manchester, vol. 68(s1), pages 122-140.
    3. Frederic S. Mishkin & Eugene N. White, 2002. "U.S. Stock Market Crashes and Their Aftermath: Implications for Monetary Policy," NBER Working Papers 8992, National Bureau of Economic Research, Inc.
    4. repec:bla:manchs:v:68:y:2000:i:0:p:122-40 is not listed on IDEAS
    5. Neal, Larry & Barbezat, Daniel, 1998. "The Economics of the European Union and the Economies of Europe," OUP Catalogue, Oxford University Press, number 9780195110685, Decembrie.
    6. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
    7. 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.
    8. 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 23-65, National Bureau of Economic Research, Inc.
    9. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1.
    10. Maurice Obstfeld & Alan M. Taylor, 1998. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 353-402, National Bureau of Economic Research, Inc.
    11. 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.
    12. 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 355-361, May.
    13. William N. Goetzmann & Lingfeng Li & K. Geert Rouwenhorst, 2005. "Long-Term Global Market Correlations," The Journal of Business, University of Chicago Press, vol. 78(1), pages 1-38, January.
    14. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 145-169, March.
    15. Michael D. Bordo & David C. Wheelock, 2004. "Monetary policy and asset prices: a look back at past U.S. stock market booms," Review, Federal Reserve Bank of St. Louis, vol. 86(Nov), pages 19-44.
    16. Michael D. Bordo & Claudia Goldin & Eugene N. White, 1998. "The Defining Moment: The Great Depression and the American Economy in the Twentieth Century," NBER Books, National Bureau of Economic Research, Inc, number bord98-1.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Harding, Don & Pagan, Adrian, 2011. "An Econometric Analysis of Some Models for Constructed Binary Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 86-95.
    2. Imran Hussain Shah & Ahmad Hassan Ahmad, 2017. "How important is the financial sector to price indices in an inflation targeting regime? An empirical analysis of the UK and the US," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 1063-1082, May.
    3. Charles Calomiris, 2009. "Banking Crises and the Rules of the Game," NBER Working Papers 15403, National Bureau of Economic Research, Inc.
    4. Michael D. Bordo & David C. Wheelock, 2007. "Stock market booms and monetary policy in the twentieth century," Review, Federal Reserve Bank of St. Louis, vol. 89(Mar), pages 91-122.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael D. Bordo & David C. Wheelock, 2007. "Stock market booms and monetary policy in the twentieth century," Review, Federal Reserve Bank of St. Louis, vol. 89(Mar), pages 91-122.
    2. Michael D. Bordo & David C. Wheelock, 2004. "Monetary policy and asset prices: a look back at past U.S. stock market booms," Review, Federal Reserve Bank of St. Louis, vol. 86(Nov), pages 19-44.
    3. Harald Edquist & Magnus Henrekson, 2006. "Technological Breakthroughs and Productivity Growth," Research in Economic History, in: Research in Economic History, pages 1-53, Emerald Group Publishing Limited.
    4. Klug, Adam & Landon-Lane, John S. & White, Eugene N., 2005. "How could everyone have been so wrong? Forecasting the Great Depression with the railroads," Explorations in Economic History, Elsevier, vol. 42(1), pages 27-55, January.
    5. Harald Edquist, 2010. "Does hedonic price indexing change our interpretation of economic history? Evidence from Swedish electrification," Economic History Review, Economic History Society, vol. 63(2), pages 500-523, May.
    6. Claudio Borio & William English & Andrew Filardo, 2003. "A tale of two perspectives: old or new challenges for monetary policy?," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 1-59, Bank for International Settlements.
    7. Edquist, Harald, 2005. "Do hedonic price indexes change history? The case of electrification," SSE/EFI Working Paper Series in Economics and Finance 586, Stockholm School of Economics, revised 29 Apr 2005.
    8. David le Bris, 2018. "What is a market crash?," Economic History Review, Economic History Society, vol. 71(2), pages 480-505, May.
    9. Bordo, Michael D. & Schwartz, Anna J., 1999. "Under what circumstances, past and present, have international rescues of countries in financial distress been successful?," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 683-708, August.
    10. David C. Wheelock, 2002. "Conducting monetary policy without government debt: the Fed's early years," Review, Federal Reserve Bank of St. Louis, vol. 84(May), pages 1-14.
    11. Bordo, Michael D. & Schwartz, Anna J., 1999. "Monetary policy regimes and economic performance: The historical record," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 3, pages 149-234, Elsevier.
    12. Calomiris, Charles W. & Mason, Joseph R. & Wheelock, David C., 2011. "Did Doubling Reserve Requirements Cause the Recession of 1937-1938? A Microeconomic Approach," Working Papers 11-03, University of Pennsylvania, Wharton School, Weiss Center.
    13. Juan Carlos Cuestas & Karsten Staehr, 2014. "The great (De)leveraging in the GIIPS countries. Domestic credit and net foreign liabilities 1998–2013," Bank of Estonia Working Papers wp2014-4, Bank of Estonia, revised 10 Oct 2014.
    14. Kiley, Michael T., 2001. "Computers and growth with frictions: aggregate and disaggregate evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 55(1), pages 171-215, December.
    15. Eugene N. White, 2004. "Bubbles and Busts: The 1990s in the Mirror of the 1920s," FRU Working Papers 2004/09, University of Copenhagen. Department of Economics. Finance Research Unit.
    16. Sun, Lixing, 2004. "Measuring time-varying capital mobility in East Asia," China Economic Review, Elsevier, vol. 15(3), pages 281-291.
    17. Andrew Atkeson & Patrick J. Kehoe, 2002. "The transition to a new economy after the Second Industrial Revolution," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    18. Gordon, Robert J., 2005. "The 1920s and the 1990s in Mutual Reflection," CEPR Discussion Papers 5412, C.E.P.R. Discussion Papers.
    19. Szalavetz, Andrea, 2011. "Innovációvezérelt növekedés? [Innovation-driven growth?]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 460-476.
    20. Lach, Saul & Trajtenberg, Manuel & Shiff, Gil, 2008. "Together but Apart: ICT and Productivity Growth in Israel," CEPR Discussion Papers 6732, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Monetary policy; Stock exchanges;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2006-051. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anna Oates (email available below). General contact details of provider: https://edirc.repec.org/data/frbslus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.