The asymmetric effects of monetary policy on stock price bubbles

Christophe Blot, Paul Hubert and Fabien Labondance ()
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Christophe Blot: Observatoire français des conjonctures économiques

No 12/2020, Sciences Po publications from Sciences Po

Abstract: Is the effect of US monetary policy on stock price bubbles asymmetric? We use a range of measures of excessive stock price variations that are unrelated to business cycle fluctuations. We find that the effects of monetary policy are asymmetric so responses to restrictive and expansionary shocks must be differentiated. The effects of restrictive monetary policy are more powerful than the effects of expansionary policies. We also find evidence that the asymmetric effect of monetary policy is state-contingent and depends on monetary, credit and business cycles as well as stock price boom-bust dynamics.

Keywords: Non-linearity; Equity; Booms and busts; Federal reserve (search for similar items in EconPapers)
JEL-codes: E44 G12 E52 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-mac and nep-mon
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Working Paper: The asymmetric effects of monetary policy on stock price bubbles (2020)
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