Identifying the interdependence between US monetary policy and the stock market

• 成果类型: Article
• 署名作者: Bjornland, Hilde C.; Leitemo, Kai
• 署名单位: BI Norwegian Business School; Norges Bank; Bank of Finland
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2008.12.001
• 发表日期: 2009
• 页码: 275-282
• 关键词: VAR; monetary policy; asset prices; identification

摘要

We estimate the interdependence between US monetary policy and the S&P 500 using structural vector autoregressive (VAR) methodology. A solution is proposed to the simultaneity problem of identifying monetary and stock price shocks by using a combination of short-run and long-run restrictions that maintains the qualitative properties of a monetary policy shock found in the established literature [Christiano, L.J., Eichenbaum, M., Evans, C.L., 1999. Monetary policy shocks: what have we learned and to what end? In: Taylor, J.B., Woodford, M. (Eds.), Handbook of Macroeconomics, vol. 1A. Elsevier, New York, pp. 65-148]. We find great interdependence between the interest rate setting and real stock prices. Real stock prices immediately fall by seven to nine percent due to a monetary policy shock that raises the federal funds rate by 100 basis points. A stock price shock increasing real stock prices by one percent leads to an increase in the interest rate of close to 4 basis points. (C) 2008 Elsevier B.V. All rights reserved.