This study “Monetary Policy and the Stock Market” is anchored on the effectiveness of the Taylor Rule in determining the interest rates that controls the amount of money in circulation. The amount of money in circulation defines the inflationary rate of an economy…
One financial instrument that is normally used by governments is the issuance of treasury bills or government bonds wherein the earning interest rates will generally be followed by the banks of that country. By using the interest rates that will define the treasury-bill holder’s earnings will slowly influence the financial market to adjust its interest rates. In the absence of other economic indicators, the treasury-bill interest rates will not only be adopted by the banks in their own financial transactions but it will also be used as the bench mark for the amount of money that will be available to borrowers. In theory, if the interest rates are low more people will borrow money from the banks. If the interest rates are high, the theory sustains that little to no borrower will loan money from the banks and most economic activity will be financed from in-house sources. Other instruments or means of conducting monetary policy includes making the government as the lender of last resort wherein the government will be the source of funds that will be available to borrowers normally a function provided by banks and other financial institutions. Another means of conducting monetary policy includes changing the reserve requirements in banks in order for them to operate. Another is where the government announces its intent to reduce or control inflation or by simply indicating the interest rates it wants for the money it intends to loan out. And last but not the least is moral suasions....
Meanwhile the true value of money is dependent on several factors such as the actual value of the goods that can be bought by the money or its value as compared with other currencies. However, given that these factors are also dependent on other economic indicators such as inflation and the volume of foreign currency reserve a country has, the correlation of the monetary policy of a country with its interest rates, stock market performance, and inflation will be explored by this paper. Monetary policy is implemented by increasing or decreasing the interest rates that is in theory would be able to inversely increase or decrease the supply of currency in circulation. In fine, the monetary policy of a country controls the amount or volume of currency in circulation to stimulate growth or maintain the stability of its economy. The primary onus of a government’s monetary authority is to create the optimal monetary policy that will stabilize prices for its basic commodities and encourage investment. The trick however is how to make banks and other financial institutions follow the interest rates the government’s monetary authorities’ desires. One financial instrument that is normally used by governments is the issuance of treasury bills or government bonds wherein the earning interest rates will generally be followed by the banks of that country. By using the interest rates that will define the treasury-bill holder’s earnings will slowly influence the financial market to adjust its interest rates. In the absence of other economic indicators, the treasury-bill interest rates will not only be adopted by the banks in their own financial transactions but it will also be ...
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(Monetary Policy and the Stock Market Dissertation)
“Monetary Policy and the Stock Market Dissertation”, n.d. https://studentshare.net/finance-accounting/10000-monetary-policy-and-the-stock-market.
This academic proposal is being carried out to discover and establish whether the UK stock market is really efficient and to identify the trends in the UK stock market. From having a glimpse at the capital market from all over the world, UK capital market is one of diversified exchange marketplace that have come under consideration from the evaluation in the research.
The researcher will try to find out the effect of the oil prices on the stock markets of Gulf Council Countries considering all the factors which affects the stock market like the capital existing in the market, the gross domestic product, the unemployment rate etc. Is there a positive correlation between the two or there is a negative correlation between the two variables that would also be analyzed.
Different research studies have been conducted in order to identify and explore the relationship between the monetary policy and stock market. The central bank has always been under pressure to come up with appropriate monetary policy in order to regulate inflation and output gap in the economy.
The author shall focus on the positive query of whether monetary policy is influenced directly or indirectly by volatility of asset prices. Using updated real time data, he shall estimate a simple and augmented Taylor rule to evaluate whether asset prices do have any direct impact on the conduct of monetary policy.
The author of the paper states that for the purposes of economic statistics and econometric calculations a wide range of tools and theories are available. An area of considerable utility is the field of calculations pertaining to quantity or variants, at an arbitrary point within a particular series.
est Rates 28 2.7 Financial Stability and Monetary Policy 28 2.8 Minsky’s Theory on Financial Crises 29 Chapter 3 - Model Outline 34 3.1 Greenspan’s Articulation 34 3.2 Taylor’s Articulation 41 3.3.Time Series Properties and Co Integration Issues 45 Before proceeding to the estimation, the time series properties of the dependent and independent variables are checked out.
The author states that Japan and the United States are contrasts in terms of each country’s economic activity. The United States is a market based economy while Japan is an export based economy. Market based economy is deemed stronger since it is not solely dependent on its exports or imports to stimulate its economic activity.
To illustrate how a stock market operates and spreads the wealth in one country, let us say Company-A has been so successful in its manufacturing operations that all its goods sell as fast they are produced. The firm knows that it could sell even more products if it could get enough money to build another factory.
The author states that financial market reforms were central to China’s commitment to the World Trade Organization, in which China became a member in 2001. Following China’s WTO membership, international investors gained easier access to the financial market. The Chinese government is trying to change the function of the two existing stock exchanges.