Interactions between the stock market and the monetary transmission mechanism: Evidence from France, Germany, UK and USA

Abstract

This paper examines the interactions between monetary policy and stock returns during the 1999-2013 period in France, Germany, Greece, UK and USA using the VAR methodology. The evidence indicates long-run relationships between the magnitudes, suggesting interdependency between each stock market and the monetary transmission mechanism of each country. In addition, we detected some short-run relationships between stock market and the fundamentals for France, Greece and US. Finally, we continued our analysis further and we used the VEC methodology for re-examining the models.