Dissecting long-run and short-run causalities between monetary policy and stock prices
Ansgar Belke () and
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Marcel Wiedmann: Hella GmbH
International Economics and Economic Policy, 2018, vol. 15, issue 4, 761-786
Abstract We adopt a Cointegrated Vector-Autoregressive (CVAR) model to analyze the long-run behavior and short-run dynamics of stock markets across five developed and three emerging economies. Our main aim is to check whether liquidity conditions play an important role for stock market developments. As an innovation, liquidity conditions enter the analysis from three angles: in the form of a broad monetary aggregate, the interbank overnight rate and net capital flows which represent the share of global liquidity that arrives in the respective country. A second objective is to understand whether central banks are able to influence the stock market.
Keywords: Asset prices; CVAR; Central banks; Monetary policy; VECM (search for similar items in EconPapers)
JEL-codes: E43 E58 (search for similar items in EconPapers)
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