Monetary Policy and Financial Markets

Abdorasoul Sadeghi, Hela Nammouri () and Seyed Komail Tayebi ()
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Hela Nammouri: UCLy (Lyon Catholic University), ESDES
Seyed Komail Tayebi: University of Isfahan, Department of Economics

Chapter 3 in Financial Markets, Speculation, and Development, 2026, pp 51-71 from Springer

Abstract: Abstract National and major global currencies, gold, stocks, bank deposits, bonds, and cryptocurrencies each have their own strengths and weaknesses, which affect their appeal to investors and thus, influence money flows into or out of these markets. These strengths and weaknesses are linked to markets sensitivity to inflation, lending and borrowing incentives, access to financial resources, and borrowing costs. Interest rate policies play a significant role in shaping investor decisions, as they potentially impact these strengths and weaknesses through the above channels. In essence, the relationship between interest rates and inflation is key, as it determines how money flows between markets, which is determining to economic development. Interest rate policies, whether they respond actively or passively to inflation, can also create a “monetary illusion,” distorting investor perceptions and influencing their investment choices.

Date: 2026
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DOI: 10.1007/978-981-95-5895-7_3

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