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Monetary Policy, Stock Returns, and the Role of Credit in the Transmission of Monetary Policy

Author

Listed:
  • Willem Thorbecke

    (The Jerome Levy Economics Institute)

  • Lee Coppock

    (The Jerome Levy Economics Institute)

Abstract

We use a multi-factor asset pricing model to investigate whether fluctuations in industry stock returns are due to industry stock returns are due to industry-specific shocks or to monetary and other macroeconomic factors. We find that common factors explain a substantial portion of the variation in stock returns, indicating that economic fluctuations are not due to industry-specific factors alone. We also find that disinflationary policy benefits large but not small firms. These results have mixed implications for the view that credit market frictions propagate monetary shocks.

Suggested Citation

  • Willem Thorbecke & Lee Coppock, 1999. "Monetary Policy, Stock Returns, and the Role of Credit in the Transmission of Monetary Policy," Macroeconomics 9902006, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:9902006
    Note: Type of Document - Acrobate PDF File; prepared on IBM PC; to print on PostScript; pages: 30; figures: included
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    Cited by:

    1. Mandel, Antoine & Veetil, Vipin P., 2021. "Monetary dynamics in a network economy," Journal of Economic Dynamics and Control, Elsevier, vol. 125(C).
    2. Nejla Bergaoui & Abdelwahed Trabelsi, 2016. "A State-Space Version of Fama and French’s Three-Factor Model: Evidence from the Tunisian Stock Exchange," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(11), pages 214-214, October.
    3. Thorbecke, Willem, 1997. "On Stock Market Returns and Monetary Policy," Journal of Finance, American Finance Association, vol. 52(2), pages 635-654, June.

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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