Can the Fed Talk the Hind Legs off the Stock Market? (replaced by CentER DP 2012-012)

Research output: Working paperDiscussion paperOther research output

Abstract

Deliberately or not, by providing its stance on the prospects of the economy, rationalizing past decisions or announcing future actions, central banks in fluence financial markets' expectations of its future policy. In bad times, monetary policy communication inducing an upward revision of the path of future policy is good news for stocks. During an expansion the effect is weak and on average negative. The response of equities to central bank talk depends critically on the business cycle. There are strong industry specific effects of monetary policy actions and communication. These industry effects relate to the variation in cyclicality of different industries. Firm-specific effects of monetary policy relate to the leverage, the size and the price-earnings ratio of firms.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Volume2011-072
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-072

Fingerprint

Stock market
Monetary policy
Industry
Central bank
Communication
Price earnings ratio
Equity
Financial markets
Cyclicality
News
Business cycles
Industry effects
Leverage

Keywords

  • Monetary policy
  • Monetary policy announcements
  • Credit Channel
  • Business cycle
  • Stock market

Cite this

Raes, L. B. D., Eijffinger, S. C. W., & Mahieu, R. J. (2011). Can the Fed Talk the Hind Legs off the Stock Market? (replaced by CentER DP 2012-012). (CentER Discussion Paper; Vol. 2011-072). Tilburg: Economics.
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abstract = "Deliberately or not, by providing its stance on the prospects of the economy, rationalizing past decisions or announcing future actions, central banks in fluence financial markets' expectations of its future policy. In bad times, monetary policy communication inducing an upward revision of the path of future policy is good news for stocks. During an expansion the effect is weak and on average negative. The response of equities to central bank talk depends critically on the business cycle. There are strong industry specific effects of monetary policy actions and communication. These industry effects relate to the variation in cyclicality of different industries. Firm-specific effects of monetary policy relate to the leverage, the size and the price-earnings ratio of firms.",
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Raes, LBD, Eijffinger, SCW & Mahieu, RJ 2011 'Can the Fed Talk the Hind Legs off the Stock Market? (replaced by CentER DP 2012-012)' CentER Discussion Paper, vol. 2011-072, Economics, Tilburg.

Can the Fed Talk the Hind Legs off the Stock Market? (replaced by CentER DP 2012-012). / Raes, L.B.D.; Eijffinger, S.C.W.; Mahieu, R.J.

Tilburg : Economics, 2011. (CentER Discussion Paper; Vol. 2011-072).

Research output: Working paperDiscussion paperOther research output

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