The impact of monetary policy shocks on stock market bubbles: International evidence

•We analyze the impact of monetary policy on bubbles on a set of OECD economies.•The response of bubble to monetary policy shocks is heterogeneous.•Financial development, liquidity, confidence or government debt affect the impact. We extend previous research on monetary policy shocks and their impac...

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Bibliographic Details
Published in:Finance research letters 2020-05, Vol.34, p.101268, Article 101268
Main Authors: Caraiani, Petre, Cǎlin, Adrian Cantemir
Format: Article
Language:English
Subjects:
Bubbles
Monetary policy
Stock markets
VAR
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Summary:•We analyze the impact of monetary policy on bubbles on a set of OECD economies.•The response of bubble to monetary policy shocks is heterogeneous.•Financial development, liquidity, confidence or government debt affect the impact. We extend previous research on monetary policy shocks and their impact on stock market bubbles, by considering a consistent data set of OECD countries in a time-varying BVAR framework. We also take into account the zero lower bound. We further determine whether the measured impact is related to variables such as the degree of financial development, credit market conditions, or the business cycle indicators and consumer confidence.
ISSN:1544-6123
1544-6131
DOI:10.1016/j.frl.2019.08.016