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The Effects of Monetary Policy on Stock Market Bubbles: Some Evidence / Jordi Gali, Luca Gambetti.
- Format:
- Book
- Author/Creator:
- Gali, Jordi.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w19981.
- NBER working paper series no. w19981
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Effects of Monetary Policy on Stock Market Bubbles
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2014.
- Summary:
- We estimate the response of stock prices to exogenous monetary policy shocks using a vector-autoregressive model with time-varying parameters. Our evidence points to protracted episodes in which, after a short-run decline, stock prices increase persistently in response to an exogenous tightening of monetary policy. That response is clearly at odds with the "conventional" view on the effects of monetary policy on bubbles, as well as with the predictions of bubbleless models. We also argue that it is unlikely that such evidence be accounted for by an endogenous response of the equity premium to the monetary policy shocks.
- Notes:
- Print version record
- March 2014.
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