The Relationship Between Money Supply and Stock Return, Before and After Quantitative Easing Policy

Yung-Shun Tsai, Chun-Ping Chang () and Shyh-Weir Tzang
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Yung-Shun Tsai: Asia University, Department of Finance
Chun-Ping Chang: Asia University, Department of Finance
Shyh-Weir Tzang: Asia University, Department of Finance

A chapter in Proceedings of the 4th Asia Pacific Management Research Conference (APMRC 2022), 2023, pp 63-79 from Springer

Abstract: Abstract This study uses the vector autoregressive model to examine the relationship between money supply and stock return, before and after the quantitative easing (QE) policy of the United States. The following results are obtained. (1) In Taiwan, the relationship between money supply and stock returns was insignificant before QE but became significant after QE, and the relationship is a positive correlation. (2) In the United States, the relationship between money supply and stock return was insignificant before and after QE. (3) The stock returns between the United States and Taiwan were significantly correlated before and after QE. (4) In the United States, the stock returns had a causal relationship with its money supply before and after QE. (5) In Taiwan, the stock returns had a causal relationship with its money supply before QE, but after QE, the causal relationship doesn’t exist. (6) Before and after QE, Taiwan’s stock returns had a causal relationship with the United States’ stock returns. (7) Before QE, the United States’ money supply and Taiwan’s money supply exhibited a two-way causal relationship, but after QE, the causal relationship ceased to exist.

Keywords: Money Supply; Stock Return; Quantitative Easing (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-076-3_5

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DOI: 10.2991/978-94-6463-076-3_5

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