Monetary policy, stock returns and inflation

Research output: Contribution to journalArticle

18 Citations (Scopus)

Abstract

The relationship between stock returns and inflation depends on both the monetary policy regime and the relative importance of demand and supply shocks. A simple analytical framework by which to empirically examine the relative importance of these two factors is developed in this paper. Our findings indicate that the positive relationship between stock returns and inflation in the 1930s is mainly due to strongly pro-cyclical monetary policy, while the strong negative relationship of stock returns and inflation during the period of 1952-1974 is largely caused by supply shocks that were relatively more important in that period. Our results are broadly consistent with the general economic literature on monetary policy and stagflation.

Original languageEnglish (US)
Pages (from-to)36-54
Number of pages19
JournalJournal of Economics and Business
Volume58
Issue number1
DOIs
StatePublished - Jan 2006
Externally publishedYes

Fingerprint

Stock returns
Monetary policy
Inflation
Supply shocks
Relative importance
Demand shocks
Economics
Demand and supply
Factors
Monetary policy regimes
Stagflation

Keywords

  • Inflation
  • Stock returns

ASJC Scopus subject areas

  • Business, Management and Accounting(all)

Cite this

Monetary policy, stock returns and inflation. / Du, Ding.

In: Journal of Economics and Business, Vol. 58, No. 1, 01.2006, p. 36-54.

Research output: Contribution to journalArticle

@article{008d4403a46d4fb6a1d36a6460d568bc,
title = "Monetary policy, stock returns and inflation",
abstract = "The relationship between stock returns and inflation depends on both the monetary policy regime and the relative importance of demand and supply shocks. A simple analytical framework by which to empirically examine the relative importance of these two factors is developed in this paper. Our findings indicate that the positive relationship between stock returns and inflation in the 1930s is mainly due to strongly pro-cyclical monetary policy, while the strong negative relationship of stock returns and inflation during the period of 1952-1974 is largely caused by supply shocks that were relatively more important in that period. Our results are broadly consistent with the general economic literature on monetary policy and stagflation.",
keywords = "Inflation, Stock returns",
author = "Ding Du",
year = "2006",
month = "1",
doi = "10.1016/j.jeconbus.2005.06.003",
language = "English (US)",
volume = "58",
pages = "36--54",
journal = "Journal of Economics and Business",
issn = "0148-6195",
publisher = "Elsevier Inc.",
number = "1",

}

TY - JOUR

T1 - Monetary policy, stock returns and inflation

AU - Du, Ding

PY - 2006/1

Y1 - 2006/1

N2 - The relationship between stock returns and inflation depends on both the monetary policy regime and the relative importance of demand and supply shocks. A simple analytical framework by which to empirically examine the relative importance of these two factors is developed in this paper. Our findings indicate that the positive relationship between stock returns and inflation in the 1930s is mainly due to strongly pro-cyclical monetary policy, while the strong negative relationship of stock returns and inflation during the period of 1952-1974 is largely caused by supply shocks that were relatively more important in that period. Our results are broadly consistent with the general economic literature on monetary policy and stagflation.

AB - The relationship between stock returns and inflation depends on both the monetary policy regime and the relative importance of demand and supply shocks. A simple analytical framework by which to empirically examine the relative importance of these two factors is developed in this paper. Our findings indicate that the positive relationship between stock returns and inflation in the 1930s is mainly due to strongly pro-cyclical monetary policy, while the strong negative relationship of stock returns and inflation during the period of 1952-1974 is largely caused by supply shocks that were relatively more important in that period. Our results are broadly consistent with the general economic literature on monetary policy and stagflation.

KW - Inflation

KW - Stock returns

UR - http://www.scopus.com/inward/record.url?scp=31644437623&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=31644437623&partnerID=8YFLogxK

U2 - 10.1016/j.jeconbus.2005.06.003

DO - 10.1016/j.jeconbus.2005.06.003

M3 - Article

AN - SCOPUS:31644437623

VL - 58

SP - 36

EP - 54

JO - Journal of Economics and Business

JF - Journal of Economics and Business

SN - 0148-6195

IS - 1

ER -