Stock Market Booms and Monetary Policy in the Twentieth Century

Abstract

This article examines the association between stock market booms and monetary policy in the United States and nine other developed countries during the 20th century.The authors find, as was true of the U.S. stock market boom of 1994-2000, that booms typically arose during periods of above-average growth of real output and below-average inflation, suggesting that booms reflected both real macroeconomic phenomena and monetary policy.They find little evidence that booms were fueled by excessive liquidity.Booms often ended within a few months of an increase in inflation and consequent monetary policy tightening.They find few differences across the different monetary policy regimes of the century.(JEL E300, E520, G180, N100, N200) Federal Reserve Bank of St. Louis Review, March/April 2007, 89(2), pp.91-122.2 Rapid growth of asset prices amid low consumer price inflation renewed interest in the question of whether monetary policy should target measures of inflation that include asset prices as well as consumer prices.Proponents of broader inflation measures include Goodhart and Hofmann (2000) and Bryan, Cecchetti, and O'Sullivan (2002).

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 74 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.