Monetary Policy, Aggregate Uncertainty, and the Stock Market

We develop and analyze a simple general equilibrium model of asset pricing in a monetary economy where the growth rate in money is partially determined by the policy of the monetary authority. Our model (i) implies that the relationship between stock prices and consumption risk is systematically dep...

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Published in:Journal of money, credit and banking credit and banking, 1995-05, Vol.27 (2), p.570-582
Main Authors: Boyle, Glenn W., Peterson, James D.
Format: Article
Language:English
Subjects:
Bank credit
Capital market
Credit
Dividends
Economic models
Equity
Investors
Modeling
Monetary policy
Monetary theory
Money supply
Securities markets
Securities prices
Stock price indexes
Stock prices
Uncertainty
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container_title Journal of money, credit and banking
container_volume 27
creator Boyle, Glenn W.
Peterson, James D.
description We develop and analyze a simple general equilibrium model of asset pricing in a monetary economy where the growth rate in money is partially determined by the policy of the monetary authority. Our model (i) implies that the relationship between stock prices and consumption risk is systematically dependent on the monetary policy regime, (ii) indicates that a rise in the 'noise' associated with a given future monetary policy unambiguously increases current stock prices, (iii) formalizes the Geske-Roll (1983) explanation for the observed negative correlation between stock returns and inflation. (Printed by permission of the publisher.)
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ispartof Journal of money, credit and banking, 1995-05, Vol.27 (2), p.570-582
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recordid cdi_proquest_miscellaneous_38968822
source International Bibliography of the Social Sciences (IBSS); ABI/INFORM Global (ProQuest); JSTOR Archival Journals and Primary Sources Collection
subjects Bank credit
Capital market
Credit
Dividends
Economic models
Equity
Investors
Modeling
Monetary policy
Monetary theory
Money supply
Securities markets
Securities prices
Stock price indexes
Stock prices
Uncertainty
title Monetary Policy, Aggregate Uncertainty, and the Stock Market
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