The relationships among monetary policy, stock prices and the exchange rate.

摘要

In this dissertation, we are interested in the relationships among monetary policy, stock prices and exchange rates. This thesis argues that on the one hand, monetary policy affects both stock prices and the exchange rate, on the other hand, stock prices and exchange rates affect monetary policy as well as each other. Therefore, the relationships between these variables are reciprocal, and it is highly probable that a shock to one variable will affect the other variables. This paper takes into account the endogenous relationship among the above mentioned variables, the conditional variances and conditional cross covariances among these variables. We examine the simultaneous relationship between monetary policy and stock prices, and between monetary policy and the exchange rate by employing the Identification Through Heteroscedasticity (ITH) method. We also examine the dynamic relationships among monetary policy and the financial variables(stock prices and the exchange rate) and the dynamic relationships among the volatilities of shocks to monetary policy and financial variables using the Vector Error Correction Model (VECM), Multivariate VAR (p), Multivariate-VARX (p) and Multivariate VAR (p)-GARCH (q, p) models.; Our findings indicate that monetary policy reacts to the fluctuations in the stock market and the exchange rate and that monetary policy has significant effects on the stock and exchange rate. We also find that there are strong spillover effects of shocks and volatilities across interest rates, stock prices and the exchange rate.