Year: 2008
Type: report
Abstract: This paper examines the association between inflation, monetary policy and U.S. stock market conditions during the second half of the 20th century.We estimate a latent variable VAR to examine how macroeconomic and policy shocks affect the condition of the stock market.Further, we examine the contribution of various shocks to market conditions during particular episodes and find evidence that inflation and interest rate shocks had particularly strong impacts on market conditions in the postwar era.Disinflation shocks promoted market booms and inflation shocks contributed to busts.We conclude that central banks can contribute to financial market stability by minimizing unanticipated changes in inflation.
DOI: 10.3386/w14019
Authors: Michael Bordo, Michael Dueker, David Wheelock
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1587997985