ABSTRACT
We investigate the impact of the financial accelerator on the reaction of asset prices to monetary policy shocks but from the demand side of the economy. In response to a 100-basis point increase in the monetary policy rate, the baseline model shows a stock price reaction of approximately 4.81% without the financial accelerator and of 5.60% with the financial accelerator. This finding is consistent with the financial accelerator literature and the literature on asset prices and monetary policy shocks.
Disclosure statement
No potential conflict of interest was reported by the author(s).