Global Journal of Economic and Finance Research

The evolution of monetary policy in recent years can probably be explained by the different characteristics of the behavior of monetary policy transmission mechanisms in relation to changes in the structure of financial systems. These changes are related to developments in the international financial and economic environment. In particular, the development and liberalization of financial markets, the deregulation of the financial system and the emergence of financial innovations. Our literature review aims to identify the main findings of rigorous studies on the link between the stock market and monetary policy. In this article, we extend this intuition by trying to understand the mechanisms through which monetary policy influences stock market prices.

monetary policy; stock market; financial system; stock prices.

1. Ben S. Bernanke, Mark Gertler, Simon Gilchrist, (1999)” Chapter 21 The financial accelerator in a quantitative business cycle framework”, Handbook of Macroeconomics, Elsevier, Volume 1, Part C,, Pages 1341-1393,
2. Fama, E. “Stock Returns, Real Activity, Inflation, and Money,” The American Economic   Review, vol. 71, September, p. 545-565.
3. Humpe, A. and Macmillan, P. (2009).    Can Macroeconomic Variables Explain Long-Term  Stock Market Movements? A Comparison of the US and Japan. Applied Financial   Economics, 19(2), 111–119.
4. Kent, C. and Lowe, P. (1997) Asset-Price Bubbles and Monetary Policy. Economic Research Department, Reserve Bank of Australia, Research Discussion Paper 9709.
5. Mankiw, N. G. (2018). Principles of Economics, 8th Edition.    Cengage Learning.
6. Marozva, G. (2020). The Effects of Monetary Policy on Stock Market Returns and Volatility: Evidence from South Africa. Academy of Accounting and Financial Studies Journal, 24(3), 1–11.
7. Mishkin Frédéric, (2010) “Money, banking and financial markets”, tenth edition.
8. Nelson, C.R. (1976). Inflation and Rates of Return on Common Stocks. The Journal   of Finance, 31(2), 471–483.
9. Patelis, A.D. (1997). Stock Return Predictability and The Role of Monetary Policy. The Journal of Finance, 52(5), 1951–1972.
10. Rigobon, Roberto & Sack, Brian, 2004. "The impact of monetary policy on asset prices," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1553-1575, November.
11. Suhaibu, I., Harvey, S. K., and Amidu, M. (2017).   The Impact of Monetary Policy on   Stock Market Performance: Evidence from Twelve (12) African Countries. Researchin International Business and Finance, 42, 1372–1382.
12. Thorbecke, W. (1997). On Stock Market Returns and Monetary Policy.    The Journal of Finance, 52(2), 635–654.
13. Yoshizo, N., Taghizadeh-Hesary, F. and Hassanzadeh, A. (2014). Response of stock markets to monetary  policy:   An Asian stock market perspective.    International Journal of Monetary Economics and Finance, 7(3), 157–174.