Evaluating the Unconventional Monetary Policy in Stock Markets: A Semi-parametric Approach

Toyoichiro Shirota

No 322, Discussion paper series. A from Graduate School of Economics and Business Administration, Hokkaido University

Abstract: This study analyzes the effect of a central bank’s intervention in stock markets, while allowing for nonlinearities and state dependencies, using a semi-parametric approach. A causal inference on such intervention is difficult because of the selfselective behavior of central banks. To address these problems, we apply the propensity score method in a time series context, exploiting stock price information of a single day. We find that first, there are demand pressure effects in stock markets if an intervention is large enough. Second, the effects are state-dependent and stronger during market downturns. Finally, a central bank’s interventions have a considerable impact on stock prices only when we take permanent demand pressure effects into consideration.

Keywords: unconventional monetary policy; stock market intervention; demand pressure effect; semi-parametric approach; propensity score (search for similar items in EconPapers)
Pages: 22 pages
Date: 2018-03
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (9)

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