Dynamic Interactions among the Stock Market, Federal Funds Rate, Inflation, and Economic Activity

This paper examines the dynamic interactions among the equity market, economic activity, inflation, and monetary policy under three monetary policy regimes using bivariate and multivariate vector autoregressive cointegrating specifications. The bivariate results for the real stock returns-inflation pair weakly support a negative correlation in the 1970s and 1980s. While the bivariate findings suggest a weak, negative relationship between real returns and the federal funds in the 1970s and 1980s, the multivariate findings strongly support short-term linkages in the 1970s. There appears to be no consistent dynamic relationship between monetary policy and stock prices in that the relationship differs across monetary regimes. Copyright 2006, The Eastern Finance Association.

Metas de inflação, política monetária e investimento: um estudo para dezessete países Inflation targets, monetary policy and investment

<abstract language="eng">In this paper two hypotheses about the relationship between monetary policy and investment in the context of the inflation target system were tested. One of these hypotheses is based on the idea of neutrality of money, and the other hypothesis is based on the reject of that idea. An investment equation for seventeen economies using a piece-wise dummy variable was estimated by the Methodology of Panel Data. The results highlight that a negative correlation between current expectation of restrictive monetary policy and current investment rose after the inflation target system implementation