TY  - JOUR
AU  - Bordo,Michael D.
AU  - Dueker,Michael J.
AU  - Wheelock,David C.
TI  - Inflation, Monetary Policy and Stock Market Conditions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14019
PY  - 2008
Y2  - May 2008
UR  - http://www.nber.org/papers/w14019
L1  - http://www.nber.org/papers/w14019.pdf
N1  - Author contact info:
Michael D. Bordo
Department of Economics
Rutgers University
New Jersey Hall
75 Hamilton Street
New Brunswick, NJ 08901
Tel: 732/822-7152
Fax: 732/932-7416
E-Mail: bordo@econ.rutgers.edu

Michael J. Dueker
Russell Investments
909 A Street
Tacoma, WA 98402
E-Mail: MDueker@Russell.com

David C. Wheelock
Research Division
Federal Reserve Bank of St. Louis
P.O. Box 442
St. Louis, MO 63166-0442
Tel: (314) 444-8570
Fax: (314) 444-8731
E-Mail: david.c.wheelock@stls.frb.org
AB  - This paper examines the association between inflation, monetary policy and U.S. stock market conditions during the second half of the 20th century. We estimate a latent variable VAR to examine how macroeconomic and policy shocks affect the condition of the stock market. Further, we examine the contribution of various shocks to market conditions during particular episodes and find evidence that inflation and interest rate shocks had particularly strong impacts on market conditions in the postwar era. Disinflation shocks promoted market booms and inflation shocks contributed to busts. We conclude that central banks can contribute to financial market stability by minimizing unanticipated changes in inflation.
ER  -