The euro area stock market channel: Does one size fit all? |
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| Authors: | David Sondermann Martin T Bohl Pierre L Siklos |
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| Institution: | 1. Department of Accounting, Finance and Governance, University of Westminster, London, UK;2. Department of Economics, University of Essex, Essex, UK;1. University of Duisburg‐Essen, Germany;2. DIW Berlin, Germany;3. IZA Bonn, Germany;4. German Council of Economic Experts, Germany;1. Department of Statistical Sciences and School of Economics, Management and Statistics, University of Bologna, Via Belle Arti, Bologna 41, I-40126, Italy;2. CSEF, University of Salerno, Via Giovanni Paolo II 132, Fisciano 84084, SA, Italy;3. University of Göttingen, Platz der Göttinger Sieben 3, 37073 Göttingen, Germany |
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| Abstract: | This paper analyzes the first part of the stock market channel of monetary policy in the euro area. We find heterogeneous reactions of euro area stock markets to unexpected ECB’s interest rate decisions. Splitting all markets into two groups, covering the stock markets reacting significantly to monetary policy shocks and the ones which do not, each sub-group reveals a higher degree of homogeneity. Interestingly, the markets, which react significantly to unexpected interest rate decisions are the markets with the highest stock market capitalization. In general, we find ECB’s decisions to be well anticipated by stock markets. |
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