Monetary shocks and stock returns: Identification through the impossible trinity
Ozdagli, Ali K.
- Publisher: Boston, MA: Federal Reserve Bank of Boston
E52 | E44 | simultaneity | E58 | G12 | G15 | Monetary policy ; Monetary policy - Hong Kong ; Stock - Prices | stock prices | monetary policy | omitted variables | G18
This paper attempts to identify how monetary policy shocks affect stock prices by using Mundell and Fleming's theory of the "Impossible Trinity." According to this theory, it is impossible to simultaneously have a fixed exchange rate, free capital movement (an absence o...