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THE INTERACTION OF MONETARY POLICY AND STOCK RETURNS
Author(s) -
Crowder William J.
Publication year - 2006
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2006.00192.x
Subject(s) - economics , stock market , monetary policy , vector autoregression , stock (firearms) , monetary economics , federal funds , restricted stock , irrational number , stock market bubble , financial economics , mechanical engineering , paleontology , geometry , biology , engineering , mathematics , horse
The “irrational exuberance” of the stock market in the late 1990s led to a discussion of the appropriate policy response by monetary authorities. Any response would be contingent on the stock market reaction to policy shocks. In this study, I employ a structural vector autoregression to estimate the response of the stock market returns to innovations in the federal funds rate. The role of the stock market in the Federal Reserve policy rule can also be examined empirically.