Monetary policy and its impact on stock market liquidity: Evidence from the euro zone
Octavio Fernández-Amador (),
Martin Gï¿½chter (),
Martin Larch () and
Georg Peter ()
Authors registered in the RePEc Author Service: Martin Gächter ()
Working Papers from Faculty of Economics and Statistics, University of Innsbruck
The recent financial crisis has been characterized by unprecedented monetary policy interventions of central banks with the intention to stabilize financial markets and the real economy. This paper sheds light on the actual impact of monetary policy on stock liquidity and thereby addresses its role as a determinant of commonality in liquidity. To capture effects both at the micro and macro level of stock markets, we apply panel estimations and vector autoregressive models. Our results suggest that an expansionary monetary policy of the European Central Bank leads to an increase of stock market liquidity in the German, French and Italian markets. These findings are robust for seven proxies of liquidity and two measures of monetary policy.
Keywords: Stock liquidity; monetary policy; euro zone (search for similar items in EconPapers)
JEL-codes: E44 E51 E52 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2011-06
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