EconPapers    
Economics at your fingertips  
 

Inflation, monetary policy and stock market conditions: quantitative evidence from a hybrid latent-variable VAR

Michael Bordo, Michael Dueker and David Wheelock

No 2008-012, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper examines the association between inflation, monetary policy and U.S. stock market conditions during the second half of the 20th century. We use a latent-variable VAR to estimate the impact of inflation and other macroeconomic shocks on a latent index of stock market conditions. Our objective is to investigate the extent to which various shocks contribute to changes in market conditions, above and beyond their direct effects on real stock prices. We find that disinflation shocks promote market booms and inflation shocks contribute to busts. Further, we find that inflation shocks can explain more of the variation in real stock prices when stock market conditions are taken into account.

Keywords: Inflation (Finance); Monetary policy; Stock market (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://research.stlouisfed.org/wp/2008/2008-012.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:fip:fedlwp:2008-012

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().

 
Page updated 2025-03-31
Handle: RePEc:fip:fedlwp:2008-012