Test the hypothesis that monetary policy responds to stock market movements - Dissertation Example

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Test the hypothesis that monetary policy responds to stock market movements

In addition to works cited in the literature review other studies that are helpful are also included in the list of references. Theoretical and Empirical Framework The goals of monetary policy are to achieve price stability and sustainable economic growth that maintains a stable price system. The main instrument of monetary policy is interest rate. According to Fuhrer and Geoff (2004) recent work suggests that stock market prices have affected monetary policy decisions. However, there are other studies that have indicated that the correlation between stock price movements and other variables have made it very problematic to identify the stock price effect. It is therefore extremely difficult to separate the relationship between changes in equity values and monetary policy because of the simultaneous interactions among the real economy, stock prices, and monetary policy actions. Literature Review According to Bernanke and Gertler (2001) changes in asset prices (including stock prices) should only impact monetary policies to the extent that they affect the central banks forecast of inflation. ...
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Name of Instructor April 8, 2011 An Investigation of the Hypothesis that Monetary Policy Responds to Stock Market Movements Course University Name Table of Contents Research Aims Theoretical and Empirical Framework Research Methodology Description of Data Results and Findings Conclusion and Limitations References Research Aims The aim of this study is to determine whether monetary policy responds to stock market movements…
Author : kaylin48
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