TY  - JOUR
AU  - Gali, Jordi
AU  - Gambetti, Luca
TI  - The Effects of Monetary Policy on Stock Market Bubbles: Some Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 19981
PY  - 2014
Y2  - March 2014
DO  - 10.3386/w19981
UR  - http://www.nber.org/papers/w19981
L1  - http://www.nber.org/papers/w19981.pdf
N1  - Author contact info:
Jordi Galí
Centre de Recerca en Economia Internacional (CREI)
Ramon Trias Fargas 25
08005 Barcelona
SPAIN
Tel: 011-34-93-5422754
Fax: 011-34-93-5421860
E-Mail: jgali@crei.cat

Luca Gambetti
Collegio Carlo Alberto
Università di Torino
E-Mail: luca.gambetti@uab.cat
M1  - published as Jordi Galí, Luca Gambetti. "The Effects of Monetary Policy on Stock Market Bubbles: Some Evidence," in Mark Gertler, organizer, "Lessons from the Financial Crisis for Monetary Policy" American Economic Journal: Macroeconomics, Volume 7, no. 1 (2015)

M3  - presented at "Lessons from Financial Crisis for Monetary Policy", October 18-19, 2013
AB  - We estimate the response of stock prices to exogenous monetary policy shocks using a vector-autoregressive model with time-varying parameters. Our evidence points to protracted episodes in which, after a short-run decline, stock prices increase persistently in response to an exogenous tightening of monetary policy. That response is clearly at odds with the "conventional" view on the effects of monetary policy on bubbles, as well as with the predictions of bubbleless models. We also argue that it is unlikely that such evidence be accounted for by an endogenous response of the equity premium to the monetary policy shocks.
ER  -