The asymmetric effects of monetary policy on stock price bubbles

Christophe Blot, Paul Hubert and Fabien Labondance

European Economic Review, 2024, vol. 168, issue C

Abstract: Is the effect of US monetary policy on stock price bubbles asymmetric? To explore this question, we compute a range of measures of excessive stock price movements that are unrelated to fundamentals. We find that the effects of monetary policy are asymmetric, so that responses to tightening and easing shocks must be distinguished. The effects of monetary policy tightening are stronger than the effects of monetary policy easing. We also find evidence that the asymmetric effect of monetary policy is state-contingent and depends on monetary, financial and business cycles.

Keywords: Financial stability; State-dependence; Asset prices; Booms and busts; Leaning against the wind (search for similar items in EconPapers)
JEL-codes: E44 E52 G12 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: The asymmetric effects of monetary policy on stock price bubbles (2020)
Working Paper: The asymmetric effects of monetary policy on stock price bubbles (2020)
Working Paper: The asymmetric effects of monetary policy on stock price bubbles (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:168:y:2024:i:c:s0014292124001533

DOI: 10.1016/j.euroecorev.2024.104824

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