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International Economics and Economic Policy

, Volume 15, Issue 4, pp 761–786 | Cite as

Dissecting long-run and short-run causalities between monetary policy and stock prices

  • Ansgar Belke
  • Marcel Wiedmann
Original Paper
  • 114 Downloads

Abstract

We adopt a Cointegrated Vector-Autoregressive (CVAR) model to analyze the long-run behavior and short-run dynamics of stock markets across five developed and three emerging economies. Our main aim is to check whether liquidity conditions play an important role for stock market developments. As an innovation, liquidity conditions enter the analysis from three angles: in the form of a broad monetary aggregate, the interbank overnight rate and net capital flows which represent the share of global liquidity that arrives in the respective country. A second objective is to understand whether central banks are able to influence the stock market.

Keywords

Asset prices CVAR Central banks Monetary policy VECM 

JEL classification

E43 E58 

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Centre for Europgeiean Policy Studies, Brussels & Institute for the Study of LaborUniversity of Duisburg-EssenBonnGermany
  2. 2.Hella GmbHLippstadtGermany

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