MONETARY POLICY AND THE U.S. STOCK MARKET

Marc D. Hayford and Anastasios Malliaris
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Marc D. Hayford: Economics, Loyola University Chicago, 820 N Michigan Ave., Chicago, IL 60611, USA

Chapter 15 in Economic Uncertainty, Instabilities and Asset Bubbles:Selected Essays, 2005, pp 233-247 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractWhat is the influence of stock market valuations on monetary policy? We use a forward-looking Taylor rule model to examine if monetary policy since the 19 October 1987 stock market crash has been influenced by the valuation of the stock market. We estimate the model using revised and real-time data and find no empirical evidence that the Federal Reserve policy attempted to moderate stock market valuations during the late 1990s despite the "irrational exuberance" comments by Chairman Greenspan. Actually, the empirical evidence suggests that the Fed accommodated the high valuations of the stock market during this period.

Keywords: Asymptotic Economic Growth; Inflation; Interest Rates; Asset Pricing; Equity Markets; Foreign Currency; Monetary Policy; Crash (search for similar items in EconPapers)
JEL-codes: C58 C73 E31 E37 E43 G12 G17 (search for similar items in EconPapers)
Date: 2005
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Journal Article: Monetary Policy and the U.S. Stock Market (2004)
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