 The effect of investors’ confidence on monetary policy transmission mechanismThe North American Journal of Economics and Finance, 2016, vol. 37, issue C, 248-266 Abstract: This paper investigates the financial stability’s effect on the monetary policy transmission mechanisms. The correlations between investors’ confidence in the markets, money growth and economic growth are analyzed along with the correlations within their volatilities. Specifically, the heteroskedasticity of the errors is exploited in a Multivariate GARCH framework to obtain endogenously estimated measures of uncertainty. By a two-step estimator, the indirect interplay of money growth and financial markets is highlighted at different time horizons. The results contrast previous literature supportive of the “Great Moderation” as causing the recent financial crisis. Effectively, by accounting for the breaks in volatility series due to structural shifts in monetary policy, a low period of macroeconomic volatility is found not to drive directly low financial stability. Keywords: Financial stability; Price–Earnings–Earnings Growth ratio; Monetary policy; Uncertainty; Multivariate GARCH-in-mean (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:37:y:2016:i:c:p:248-266 DOI: 10.1016/j.najef.2016.05.003 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.