STOCK PRICES AND MONETARY POLICY SHOCKS: A GENERAL EQUILIBRIUM APPROACH - HAL-SHS - Sciences de l'Homme et de la Société Accéder directement au contenu
Pré-Publication, Document De Travail Année : 2012

STOCK PRICES AND MONETARY POLICY SHOCKS: A GENERAL EQUILIBRIUM APPROACH

Résumé

Recent empirical literature documents that unexpected changes in the nominal interest rates have a significant effect on real stock prices: a 25-basis point increase in the nominal interest rate is associated with an immediate decrease in broad real stock indices that may range from 0.6 to 2.2 percent, followed by a gradual decay as real stock prices revert towards their long-run expected value. In this paper, we assess the ability of a general equilibrium New Keynesian asset-pricing model to account for these facts. The model we consider is a production economy with elastic labor supply, staggered price and wage setting, as well as time-varying risk aversion through habit formation. We find that the model predicts a stock market response to policy shocks that matches empirical estimates, both qualitatively and quantitatively. Our findings are robust to a range of variations and parameterizations of the model.
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Dates et versions

hal-00719956 , version 1 (23-07-2012)
hal-00719956 , version 2 (07-09-2012)

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  • HAL Id : hal-00719956 , version 2

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Edouard Challe, Chryssi Giannitsarou. STOCK PRICES AND MONETARY POLICY SHOCKS: A GENERAL EQUILIBRIUM APPROACH. 2012. ⟨hal-00719956v2⟩
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