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

  • Willem Thorbecke

    (The Jerome Levy Economics Institute)

  • Lee Coppock

    (The Jerome Levy Economics Institute)

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.

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File URL: http://128.118.178.162/eps/mac/papers/9902/9902006.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 9902006.

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Length: 30 pages
Date of creation: 05 Feb 1999
Date of revision:
Handle: RePEc:wpa:wuwpma:9902006
Note: Type of Document - Acrobate PDF File; prepared on IBM PC; to print on PostScript; pages: 30; figures: included
Contact details of provider: Web page: http://128.118.178.162

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  1. Stockman, Alan C., 1988. "Sectoral and national aggregate disturbances to industrial output in seven European countries," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 387-409.
  2. Gertler, Mark & Gilchrist, Simon, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 309-40, May.
  3. Dennis W. Carlton, 1986. "The Rigidity of Prices," NBER Working Papers 1813, National Bureau of Economic Research, Inc.
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