The Impact of Financial Deregulation on the Relationship between Stock Prices and Monetary Policy
Document Type
Article
Publication Title
Quarterly Journal of Business and Economics
ISSN
0747-5535
Volume
33
Issue
3
First Page
37
Last Page
50
Publication Date
Summer 9-1-1994
Abstract
This paper examines whether aggregate stock prices fully incorporated all available information on the money supply in the United States from January 1978 to September 1990, a period that witnessed the deregulation of deposit rates and several changes in the Federal Reserve's short-run operating procedure. A Granger causality test is performed in the context of a bivariate error correction model (ECM) on the monthly data. I find that stock prices did not fully digest and reflect changes in money supply during this period. This phenomenon can be attributed partly to the existence of a relatively volatile relationship between money supply and overall economic activity engendered by financial deregulation.
Recommended Citation
Lee, U.
(1994).
The Impact of Financial Deregulation on the Relationship between Stock Prices and Monetary Policy.
Quarterly Journal of Business and Economics, 33(3), 37–50.
https://scholarlycommons.pacific.edu/esob-facarticles/237
