IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Monetary Policy, Stock Prices and Central Banks - Cross-Country Comparisons of Cointegrated VAR Models

  • Ansgar Belke

    ()

  • Marcel Wiedmann

In this paper, we analyze the long-run behavior and short-run dynamics of stock markets across some selected developed and emerging economies – namely the United States, the Euro Area, Japan, the United Kingdom, Australia, South Korea, Thailand and Brazil – in the Cointegrated Vector-Autoregressive (CVAR) framework. The main purpose is to assess empirically if liquidity conditions play a significant role for stock market developments. As an innovation, liquidity conditions enter the analysis from three angles: in the form of a broad monetary aggregate, the interbank overnight rate and net capital flows which in our case stands for the share of global liquidity that arrives in the recipient economy. A second aim is to check empirically whether central banks are able to serve as a driver of the stock market as it, for instance, seems to be the case in late 2012 and 2013 in the wake of the forward guidance conveyed by central banks worldwide.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://repec.rwi-essen.de/files/REP_13_435.pdf
Download Restriction: no

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0435.

as
in new window

Length: 29 pages
Date of creation: Aug 2013
Date of revision:
Handle: RePEc:rwi:repape:0435
Contact details of provider: Postal:
Hohenzollernstraße 1-3, 45128 Essen

Phone: (0201)8149-0
Fax: (0201)8149-200
Web page: http://www.rwi-essen.de/
Email:


More information through EDIRC

Order Information: Web: http://www.rwi-essen.de/publikationen/

References listed on IDEAS
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.:

as in new window
  1. Kenneth Kuttner & Patricia Mosser, 2002. "The monetary transmission mechanism in the United States: some answers and further questions," BIS Papers chapters, in: Bank for International Settlements (ed.), Market functioning and central bank policy, volume 12, pages 433-443 Bank for International Settlements.
  2. 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.
  3. Reinhart, Carmen & Rogoff, Kenneth, 2008. "Las secuelas de las crisis financieras
    [The aftermath of financial crisis]
    ," MPRA Paper 13695, University Library of Munich, Germany.
  4. Kenneth N. Kuttner, 2000. "Monetary policy surprises and interest rates: evidence from the Fed funds futures markets," Staff Reports 99, Federal Reserve Bank of New York.
  5. Ansgar Belke & Ingo G. Bordon & Torben W. Hendricks, 2009. "Global Liquidity and Commodity Prices: A Cointegrated VAR Approach for OECD Countries," Discussion Papers of DIW Berlin 898, DIW Berlin, German Institute for Economic Research.
  6. Philip R. Lane & Gian Maria Milesi-Ferretti, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities,1970–2004," The Institute for International Integration Studies Discussion Paper Series iiisdp126, IIIS.
  7. Allan H. Meltzer, 1995. "Monetary, Credit and (Other) Transmission Processes: A Monetarist Perspective," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 49-72, Fall.
  8. Browne, Frank & Cronin, David, 2006. "Commodity Prices, Money and Inflation," Research Technical Papers 16/RT/06, Central Bank of Ireland.
  9. Frederic S. Mishkin, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 3-10, Fall.
  10. Soren Johansen & Katarina Juselius, 2001. "Controlling Inflation in a Cointegrated Vector Autoregressive Model with an Application to US Data," Discussion Papers 01-03, University of Copenhagen. Department of Economics.
  11. Raghuram G. Rajan, 2005. "Has Financial Development Made the World Riskier?," Working Papers id:248, eSocialSciences.
  12. Paolo Mauro, 2000. "Stock Returns and Output Growth in Emerging and Advanced Economies," IMF Working Papers 00/89, International Monetary Fund.
  13. Orawan Ratanapakorn & Subhash Sharma, 2007. "Dynamic analysis between the US stock returns and the macroeconomic variables," Applied Financial Economics, Taylor & Francis Journals, vol. 17(5), pages 369-377.
  14. Andreas Humpe & Peter Macmillan, 2009. "Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan," Applied Financial Economics, Taylor & Francis Journals, vol. 19(2), pages 111-119.
  15. 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.
  16. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
  17. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
  18. Döpke, Jörg & Hartmann, Daniel & Pierdzioch, Christian, 2006. "Forecasting stock market volatility with macroeconomic variables in real time," Discussion Paper Series 2: Banking and Financial Studies 2006,01, Deutsche Bundesbank, Research Centre.
  19. Klaas Baks & Charles Frederick Kramer, 1999. "Global Liquidity and Asset Prices; Measurement, Implications, and Spillovers," IMF Working Papers 99/168, International Monetary Fund.
  20. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  21. Markus K Brunnermeier, 2002. "Bubbles and Crashes," FMG Discussion Papers dp401, Financial Markets Group.
  22. Hamburger, Michael J & Kochin, Levis A, 1972. "Money and Stock Prices: The Channels of Influence," Journal of Finance, American Finance Association, vol. 27(2), pages 231-49, May.
  23. Masahiro Inoguchi, 2007. "Influence of ADB Bond Issues and US Bonds on Asian Government Bonds ," Asian Economic Journal, East Asian Economic Association, vol. 21(4), pages 387-404, December.
  24. Muscatelli, V. Anton & Spinelli, Franco, 2000. "The long-run stability of the demand for money: Italy 1861-1996," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 717-739, June.
  25. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679, June.
  26. Søren Johansen, 2007. "Correlation, regression, and cointegration of nonstationary economic time series," CREATES Research Papers 2007-35, Department of Economics and Business Economics, Aarhus University.
  27. repec:zbw:rwirep:0102 is not listed on IDEAS
  28. Ben S. Bernanke & Kenneth N. Kuttner, 2004. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," NBER Working Papers 10402, National Bureau of Economic Research, Inc.
  29. Markus K. Brunnermeier & Stefan Nagel, 2004. "Hedge Funds and the Technology Bubble," Journal of Finance, American Finance Association, vol. 59(5), pages 2013-2040, October.
  30. Juselius, Katarina & Toro, Juan, 2005. "Monetary transmission mechanisms in Spain: The effect of monetization, financial deregulation, and the EMS," Journal of International Money and Finance, Elsevier, vol. 24(3), pages 509-531, April.
  31. Cheung, Yin-Wong & Ng, Lilian K., 1998. "International evidence on the stock market and aggregate economic activity," Journal of Empirical Finance, Elsevier, vol. 5(3), pages 281-296, September.
  32. Kwon, Chung S. & Shin, Tai S., 1999. "Cointegration and causality between macroeconomic variables and stock market returns," Global Finance Journal, Elsevier, vol. 10(1), pages 71-81.
  33. Maysami, Ramin Cooper & Koh, Tiong Sim, 2000. "A vector error correction model of the Singapore stock market," International Review of Economics & Finance, Elsevier, vol. 9(1), pages 79-96, February.
  34. Louis Be Duc & Frank Mayerlen & Pierre Sola, 2008. "The monetary presentation of the euro area balance of payments," Occasional Paper Series 96, European Central Bank.
  35. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, June.
  36. Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
  37. Lastrapes, W. D., 1998. "International evidence on equity prices, interest rates and money," Journal of International Money and Finance, Elsevier, vol. 17(3), pages 377-406, June.
  38. Allen, Franklin & Gale, Douglas, 2000. "Bubbles and Crises," Economic Journal, Royal Economic Society, vol. 110(460), pages 236-55, January.
  39. Kenneth N. Kuttner & Patricia C. Mosser, 2002. "The monetary transmission mechanism: some answers and further questions," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 15-26.
  40. Ansgar Belke & Walter Orth & Ralph Setzer, 2008. "Sowing the seeds for the subprime crisis: does global liquidity matter for housing and other asset prices?," International Economics and Economic Policy, Springer, vol. 5(4), pages 403-424, December.
  41. Wing-Keung Wong & Habibullah Khan & Jun Du, 2006. "Do Money And Interest Rates Matter For Stock Prices? An Econometric Study Of Singapore And Usa," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 51(01), pages 31-51.
  42. Friedman, Milton, 1988. "Money and the Stock Market," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 221-45, April.
  43. Katarina Juselius, 2001. "European integration and monetary transmission mechanisms: the case of Italy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 341-358.
  44. Lee, Bong-Soo, 1992. " Causal Relations among Stock Returns, Interest Rates, Real Activity, and Inflation," Journal of Finance, American Finance Association, vol. 47(4), pages 1591-603, September.
  45. Döpke, Jörg & Hartmann, Daniel & Pierdzioch, Christian, 2006. "Real-time macroeconomic data and ex ante predictability of stock returns," Discussion Paper Series 1: Economic Studies 2006,10, Deutsche Bundesbank, Research Centre.
  46. Frederic S. Mishkin, 2001. "The Transmission Mechanism and the Role of Asset Prices in Monetary Policy," NBER Working Papers 8617, National Bureau of Economic Research, Inc.
  47. Philip R. Lane & Gian Milesi-Ferretti, 2006. "The External Wealth of Nations Mark II; Revised and Extended Estimates of Foreign Assets and Liabilities, 1970–2004," IMF Working Papers 06/69, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rwi:repape:0435. 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: (Sabine Weiler)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.