Location of Repository

Essays on monetary policy and financial markets

By João Miguel Soucasaux Meneses e Sousa


This thesis provides a contribution to the analysis of the link between monetary\ud policy and financial markets. It does so by combining elements from the finance\ud and economics literature and developing areas of intersection which, to some extent,\ud have been evolving in a rather autonomous manner. The thesis takes an\ud empirical perspective and examines three main issues. The first regards the modelling\ud of the short-term interest rate where models are presented that integrate\ud finance contributions with the literature on monetary policy rules. The chapter\ud concludes that there are non-linearities in the short-rate process and these are related\ud to macroeconomic factors in a way consistent with a monetary policy rule. A\ud second essay deals with the effect of monetary policy announcements, improving\ud on previous contributions by extending the investigation to a broader set of instruments\ud and using multivariate models of volatility to capture in a better way the\ud complex interactions between monetary policy and financial markets. The issue\ud of the endogeneity of monetary policy is also a main concern in the final essay of\ud the thesis which examines the contribution of monetary policy shocks in explaining\ud fluctuations in real stock prices in the G7. In this chapter, it is argued that\ud previous approaches may suffer from an omitted variables problem. By including\ud a minimum set of variables both for identifying monetary policy shocks and\ud explaining real stock prices, the study concludes that monetary policy may make\ud a stronger contribution to stock price fluctuations than what is usually found in\ud similar studies

Topics: HG
OAI identifier: oai:wrap.warwick.ac.uk:4062

Suggested articles



  1. (1988). A Capital Asset Pricing Model with Time Varying Covariances", doi
  2. (2001). A Comparison of Tests of Non-linear Cointegration with an Application to the Predictability of US Interest Rates using the Term Structure", doi
  3. (1969). A General Equilibrium Approach To Monetary Theory", doi
  4. (1989). A New Approach to the Economic Analysis of Nonstationary Time series and the Business Cycle", doi
  5. (1983). A Reconsideration of Sims' Evidence Regarding Monetarism" doi
  6. (1991). A Variance Decomposition for Stock Returns", doi
  7. (1992). An Empirical Comparison of Alternative Models of the Short-term Interest Rate", doi
  8. (1994). An Empirical Examination of the Cox, Ingersoll, and Ross Model of the Term Structure of Interest Rates using the Method of Maximum Likelihood",
  9. (1997). An Optimizat ion- Based Econometric Model for the Evaluation of Monetary Policy", doi
  10. (1999). Are Stock Returns Different Over Weekends? A Jump Diffusion Analysis of the 'Weekend Effect"', New England Economic RevZew, Sep/Oct,
  11. (1990). Asset Pricing With a Factor ARCH Covariance Structure: Empirical Estimates for Týeasury Bills",
  12. (1977). Asset Returns and Inflation", doi
  13. (1985). Asset Returns, Discount Rate Changes, and Market Efficiency", doi
  14. (2000). Asymmetries in Monetary Policy Rules: Evidence for Four Central Banks",
  15. (1982). Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of U. doi
  16. (1994). Business Cycle Phases and their Transitional Dynamics", doi
  17. (1964). Capital Asset Prices: A Theory of Market Equillibrium in under Conditions of Risk", doi
  18. (1992). Causal Relations Among Stock Returns, Interest Rates, Real Activity, and Inflation", doi
  19. (1976). Common Stocks as a Hedge Against Inflation", doi
  20. (1991). Conditional Heteroskedasticity in Asset Returns: A New Approach", doi
  21. (1997). Conditional Methods in Event Studies and an Equilibrium Justification for Standard Event-Study Procedures", doi
  22. (1993). Discretion versus Policy Rules in Practice", doi
  23. (1979). Distribution of the Estimators for Autoregressive Time Series with a Unit Root, " doi
  24. (1999). Do Monetary Policy Shocks Matter in the G-7 Countries? Using common Identifying Assumptions about Monetary Policy Across Countries", doi
  25. (1995). Does Monetary Policy Create Recessions? ", Working Paper,
  26. (1989). Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz" doi
  27. (2002). Does the Fed Possess Inside Information About the Economy? ", US Federal Reserve Board,
  28. (2002). Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models", doi
  29. (1995). Economic and Monetary Union in Europe: Moving Beyond Maastricht, Cambridge: doi
  30. (1986). Economic Forces and the Stock Market" doi
  31. (2001). Economic News and Bond Prices: doi
  32. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work", doi
  33. (2000). Endogenous Monetary Policy and the Business Cycle",
  34. (1966). Equillibrium in a Capital Asset Market", doi
  35. (1993). Estimating the Open Market Desk's Daily Reaction Function", doi
  36. (1974). Estimation and Inference in Nonlinear Structural Models",
  37. (2001). Evolution of Market Uncertainty Around Earnings Announcements", doi
  38. (1987). Expected Stock Returns and Volatility", doi
  39. (1975). Fact and Fantasy in the Use of Options", doi
  40. (2000). Federal Reserve Information and the Behaviour of Interest Rates", doi
  41. (1981). Flexible Exchange Rates, Prices, and the Role of 'News': Lessons from the 1970s", doi
  42. (2001). Forecasting S&PIOO Volatility: the Incremental Information Content of Implied Volatilities and High-Frequency Index Returns", doi
  43. (1986). Generalized Autoregressive Conditional Heteroskedasticity)), doi
  44. (1999). Global Liquidity and Asset Prices: Measurement, Implications and Spillovers", IMF Working Paper no. doi
  45. (1994). Goals, Guidelines, and Constraints Facing Monetary Policymakers,
  46. (1979). Imperfect Information, Dividend Policy, and "the Bird in the Hand" Fallacy", doi
  47. (1997). Inference in TAR Models" doi
  48. (1976). Inflation and Rates of Return on Common Stocks" doi
  49. (1975). Inflation and Security Returns", doi
  50. (1997). Inflation-Indexed Bonds: How Do They Work? ", Federal Reserve Bank of Philadelphia BusZness Review,
  51. (1996). Inflation, Asset Prices and the Term Structure of Interest Rates in Monetary Economics", Review of Financial Studies, doi
  52. (1996). Inflation, Real Stock Returns, and Monetary Policy", doi
  53. (1998). Information and volatility linkages in the stock, bond, and money markets. " doi
  54. (1989). Information and Volatility: the No-Arbitrage Martingale Approach to Timing and Resolution Irrelevancy", doi
  55. (2002). Interdependence between the Euro Area and the US: What Role for EMUT', doi
  56. (2003). Interest and Prices: Foundations of a Theory of Monetary Policy, doi
  57. (1991). Interest Rates and the Conduct of Monetary Policy", doi
  58. (1999). Interest-Rate Rules in an Estimated Sticky Price Model. " doi
  59. (1998). International Evidence on Equity prices, Interest Rates and Money", doi
  60. (1992). Interpreting the Macroeconomic Times Series Facts: the Effects of Monetary Policy", doi
  61. (2001). Intraday Volatility in Interest Rate and Foreign Exchange Markets: ARCH, Announcement, and Seasonality Effects", doi
  62. (2000). Is Disinflation Good for the Stock Market? ",
  63. (2000). Is the short rate drift actually nonlinear? ", doi
  64. (2001). Lag Length Selection and the Constructionof Unit Root Tests With Good Size and Power", doi
  65. (1995). Likelihood-based Inference in Cointegrated Vector Autoregressive Models, doi
  66. (1992). Liquidity, Loanable Funds and Real Activity", doi
  67. (2001). Macro Shocks and Real Stock Prices", doi
  68. (2000). Macroeconomic Announcement Effects on the Covariance Structure of Government Bond Returns" doi
  69. (1998). Macroeconomic announcements and volatility of treasury futures",
  70. (1998). Macroeconomic News and Bond Market Volatility",
  71. (2003). Macroeconomic News and the Euro/Dollar Exchange Rate", doi
  72. (1980). Macroeconomics and Reality", doi
  73. (1991). Market Reaction to Anticipated Announcements"
  74. (1998). Market Reaction to Monetary Policy Nonannouncements" , Federal reserve Bank of Kansas City, Research Working Paper No.
  75. (2002). Market-based Measures of Monetary Policy Expectations", doi
  76. (1996). Measuring International Economic Linkages with Stock Market Data", doi
  77. (1998). Measuring Monetary Policy", doi
  78. (2003). Measuring the Reaction of Monetary Policy to the Stock Market", doi
  79. (2003). Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange" doi
  80. (1991). Modeling the Liquidity Effect of a Money Shock" , Federal Reserve Bank of Minneapolis Quarterly Review,
  81. (1998). Modelling Asymmetric Comovements of Asset Returns", doi
  82. (1990). Modelling the Coherence in Short-Run Nominal Exchange Rates: A Multivariate Generalized ARCH Model" doi
  83. (1996). Modelling the Conditional Distribution of 1nterest rates as a Regime Switching Process",
  84. (1994). Monetary Aggregates Targeting in a Low-Inflation Economy"
  85. (2002). Monetary policy and Asset Prices", doi
  86. (1996). Monetary Policy and Financial Market Expectations: What Did They Know and When Did They Know It? ", Federal Reserve Bank of St. Louis Review, doi
  87. (2001). Monetary Policy and Market Interest Rates", doi
  88. (1997). Monetary Policy Regimes and Economic Performance: the Historical Record", doi
  89. (2001). Monetary Policy Rules Based on Real-Time Data", doi
  90. (1998). Monetary Policy Rules in Practice, Some International Evidence" doi
  91. (1999). Monetary policy rules, doi
  92. (1999). Monetary Policy Shocks: What Have we Learned and to What End? ", doi
  93. (2001). Monetary Policy Surprises and Interest Rates: Evidence from the Fed Funds Futures Market", doi
  94. (1998). Monetary Theory and Policy, doi
  95. (2003). Multivariate GARCH Models: A Survey", doi
  96. (1995). Multivariate Simultaneous GARCH", doi
  97. (2002). Non-Linear Monetary Policy Rules: Some New Evidence for the US", CEPR Discussion Paper no. doi
  98. (2000). Non-linear Time Series Models in Empirical finance, Cambridge: doi
  99. (1996). Numerical Distribution Functions Tests", doi
  100. (1978). On a Threshold Model", doi
  101. (1993). On Periodic Stochastic Regime Switching in Time Series Models", doi
  102. (1997). On Stock Market Returns and Monetary Policy", doi
  103. (1974). On the Pricing of Corporate Debt: the Risk Structure of Interest Rates", doi
  104. (1978). On the Term Structure of Interest Rates", doi
  105. (1984). Optimal Bond Týading with Personal Taxes", doi
  106. (2003). Optimal Monetary Policy and the Correlation between Prices and Output", doi
  107. (1976). Option Pricing When Underlying Stock Returns are Discontinuous", doi
  108. (2000). Options and Earnings Announcements: an Empirical Study of Volatility, Trading Volume, Open Interest and Liquidity", doi
  109. (2003). Parametric and Nonparametric Volatility Measurement, " doi
  110. (1999). Performance of Operational policy Rules in an Estimated Semi-Classical Structural Model', in doi
  111. (1999). Policy Rules for Open Economies", doi
  112. (2003). Pre-Announcement Effects, News, and Volatility: Monetary Policy and the Stock Market", doi
  113. (2002). Quadratic Term Structure Models: Theory and Evidence", doi
  114. (1992). Quasi-Maximum Likelihood Estimation and Inference in Dynamic Models with Time Varying Covariances", Econometric Reviews, doi
  115. (2000). Regime Switching and Interest Rates in the European Monetary System", doi
  116. (1994). Regime Switching with Time-varying Transition Probabilities",
  117. (1977). Savings Bonds, Retractable Bonds, and Callable Bonds" doi
  118. (2002). Short Rate Nonlinearities and Regime Switches", doi
  119. (1996). Specification Testing in Markov-Switching Time Series Models", doi
  120. (1983). Stochastic Processes for Interest Rates and Equilibrium Bond Prices", doi
  121. (1997). Stock Return Predictability and the Role of Monetary Policy", doi
  122. (1999). Stock Returns and Inflation with Supply and Demand Disturbances, doi
  123. (1993). Stock Returns and Inflation: A LongHorizon Perspective",
  124. (1987). Stock Returns and Inflation: the Role of the Monetary Sector",
  125. (1980). Stock Returns and the Weekend Effect", doi
  126. (1981). Stock Returns, Real Activity, Inflation and Money",
  127. (1976). Studies of Stock Price Volatility Changes",
  128. (2002). Term Structure of Interest Rates with Regime Shifts", doi
  129. (1996). Testing Continuous-Time Models of the Spot Interest Rate", doi
  130. (1988). Testing for a Unit Root in Time Series Regression", doi
  131. (1996). Testing the Adequacy of Smooth Transition Autoregressive Models", doi
  132. (1992). Testing the Null Hypothesis of Stationary against the Alternative of a Unit Root", doi
  133. (1969). The Adjustment of Stock Prices to New Information", doi
  134. (1976). The Arbitrage Theory of Capital Asset pricing", doi
  135. (1959). The Demand for Money: Some Theoretical and Empirical Results", doi
  136. (1988). The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors", The Review of Financtal Studies, doi
  137. (2001). The ECB Monetary Policy Strategy and the Money Market", doi
  138. (1988). The Effect of Changes in the Federal Funds Rate Target on Market Interest Rates in the 1970s", doi
  139. (1998). The Effects of Macroeconomic News on High Frequency Exchange Rate Behaviour", doi
  140. (1996). The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds", doi
  141. (2002). The Equity Premium", doi
  142. (2002). The Fed and Interest Rates. A HighFrequency Identification", American Economic Review, Papers and doi
  143. (1996). The Fed Funds Futures Rate as a Predictor of Federal Reserve Policy", doi
  144. (1992). The Federal Funds Rate and the Channels of Monetary Transmission", doi
  145. (1983). The Fiscal and Monetary Linkage between Stock Returns and Inflation", doi
  146. (1936). The General Theory of Employment, Interest and Money, doi
  147. (1995). The Identification of Monetary Policy Disturbances: Explaining the Liquidity Puzzle", doi
  148. (1986). The Information Content of Discount Rate Announcements and their Effect on Market Rates", Federal Reserve Bank of Richmond Working Paper no.
  149. (2000). The Investor Fear Gauge", doi
  150. (2003). The Link Between Monetary Policy and Stock and Bond Markets: Evidence from the Federal Funds Contract" doi
  151. (1995). The Monetary Policy of the Bundesbank, Deutsche Bundesbank. doi
  152. (1973). The Pricing of Options and Corporate Liabilities", doi
  153. (1998). The Relation Between Implied and Realised Volatility",
  154. (1982). The Stochastic Behavior of Common Stock Variances: Value, Leverage and Interest Rate Effects", doi
  155. (2002). The stock return-inflation puzzle revisited", doi
  156. (1940). The Structure of Interest Rates", doi
  157. (2002). The surprise element: jumps in interest rates", doi
  158. (1973). Theory of Rational Option Pricing", doi
  159. (1980). Threshold Autoregressions, Limit Cycles, and Data",
  160. (1995). Time - Consistent Policy and Persistent Changes in Inflation", doi
  161. (1994). Time Series Analysis, doi
  162. (1997). What Moves the Bond Market? " , Economic Policy Review, Federal Reserve Bank of
  163. (1993). What Moves the Stock and Bond Markets? A Variance Decomposition for Long-term Asset Returns", doi
  164. (1997). When Do Long-Run Identifying Restrictions Give Reliable Results? ", doi
  165. (1996). Why do the monetary authorities smooth interest rates? ",
  166. (2003). Why Is It So Difficult to Beat the Random Walk Forecast of Exchange Rates? ", doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.