The US Monetary Base and Major World Equity Markets: An Empirical Investigation

Bahram Adrangi (), Arjun Chatrath (), Joseph Macri () and Kambiz Raffiee ()
Additional contact information
Bahram Adrangi: University of Portland, 5000 N. Willamette Blvd, Portland, Oregon 97203, U.S.A.
Arjun Chatrath: University of Portland, 5000 N. Willamette Blvd, Portland, Oregon 97203, U.S.A.
Kambiz Raffiee: College of Business at University of Nevada, Reno, Nevada 89557, U.S.A.

Review of Economics & Finance, 2016, vol. 6, 49-64

Abstract: This paper investigates the relationship between the US monetary base and the five largest equity indices of the world. The mainstay of the study is the vector autoregressive approach (VAR). Analyzing impulse response functions shows strong support for the notion that the US monetary base is associated with movements in the major equity markets. For instance, positive shocks to the monetary base in the US, are responsible for positive changes in the world equity markets that may last up to six months. Examining impulse responses of equity indices from a Markov Switching VAR, which takes regime changes into account, confirm these findings. Furthermore, we show that equity responses to the positive shocks to the monetary base may be much higher than those to negative shocks. We conclude the US monetary base, and quantitative easing may have contributed to a positive business and credit climate in advanced economies of the world.

Keywords: Quantitative Easing; Equity Markets; Markov Switching VAR; Granger Causality (search for similar items in EconPapers)
JEL-codes: E44 E50 E52 (search for similar items in EconPapers)
Date: 2016
Note: This paper benefited from the recommendations of an anonymous reviewer. The remaining errors are the authors' responsibility.
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.bapress.ca/ref/ref-article/1923-7529-2016-03-49-16.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bap:journl:160304

Ordering information: This journal article can be ordered from
17 Alton Towers Circle, Unit 101 Toronto, ON, M1V3L8, Canada

Access Statistics for this article

Review of Economics & Finance is currently edited by H. Carlson

More articles in Review of Economics & Finance from Better Advances Press, Canada 17 Alton Towers Circle, Unit 101 Toronto, ON, M1V3L8, Canada.
Bibliographic data for series maintained by Carlson ( this e-mail address is bad, please contact ).