Financial accelerator, household portfolio, stock prices, and monetary policy shocks

Sedjro Aaron Alovokpinhou, Pholile Dladla and Christopher Malikane

Applied Economics Letters, 2024, vol. 31, issue 1, 31-39

Abstract: We investigate the impact of the financial accelerator on the reaction of asset prices to monetary policy shocks but from the demand side of the economy. In response to a 100-basis point increase in the monetary policy rate, the baseline model shows a stock price reaction of approximately 4.81% without the financial accelerator and of 5.60% with the financial accelerator. This finding is consistent with the financial accelerator literature and the literature on asset prices and monetary policy shocks.

Date: 2024
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DOI: 10.1080/13504851.2022.2121377

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