Acta academica karviniensia 2014, 14(1):176-189 | DOI: 10.25142/aak.2014.018

THE IMPACT OF THE MONEY SUPPLY ON STOCK PRICES AND STOCK BUBBLES

Martin Širůček
Mendel University in Brno, Faculty for business and economics, Zemědělská 1, 613 00 Brno, Email: sirucek@gmail.com

This article is focused on the effect and implication of a change in the money supply for the US capital market. This market was chosen according to its part on the global market capitalization. Namely it is the Dow Jones Industrial Average (DJIA), which was chosen according to its long history, global sense and stabile construction. The money supply will be measured by the wider aggregate M2 and aggregate MZM (money with zero maturity). The goal of this paper is to detect, if the money supply influenced the stock indices in the years 1967 - 2011, if the impact of both money aggregates is nearly the same, and how the money supply influenced the bubble creation.

Keywords: co-integration, Granger causality, money supply, stock index, unit root test
JEL classification: E51, G11, G12

Received: June 29, 2012; Accepted: September 11, 2013; Published: March 30, 2014  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Širůček M. THE IMPACT OF THE MONEY SUPPLY ON STOCK PRICES AND STOCK BUBBLES. Acta academica karviniensia. 2014;14(1):176-189. doi: 10.25142/aak.2014.018.
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. ARLT, J., 1997. Kointegrace v jednorovnicových modelech. Politická ekonomie [online]. 45(5), 733 - 746. [cit. 2nd November 2011]. Accessible from: http://nb.vse.cz/~arlt/publik/A_KJM_97.pdf Go to original source...
    2. BAUMÖHL, E., 2008. Skúmanie jednosmerných závislosti medzi svetovými akciovými indexmi. In: Národná a regionálná ekonomika VII. Bratislava: Ekonomická univerzita v Bratislavě. [cit. 20th May 2012]. Accessible from: http://www3.ekf.tuke.sk/konfera2008/zbornik/files/abstrakty/baumohl_a.pdf
    3. BERNANKE, B., 2013. Monetary policy and the stock market. The Federal Reserve board. [online]. [cit. 27th March 2012]. Accessible from: http://www.federalreserve.gov/boarddocs/speeches/2003/20031002/default.htm.
    4. BIANYING, X., 2004. Interaction of stock price of listed companies and macroeconomiy of China. Wuham University of science and technologies: Master's degree dissertation.
    5. BILSON, C. M., T. J. BRAILSFORD and V. J. HOOPER, 2000. Selecting marcoeconomic variables as explanatory factors of emerging stocks market returns. The Australian national university. Working papers series in finance 00-04. Go to original source...
    6. BRAHMASRENE, T. and K. JIRANYAKUL, 2007. Co-integration and causality between stock index and macroeconomic variables in a emerging markets. Academy of Acounting and Financial Studies Journal.
    7. CAGLI, E. C., U. HALC and D. TASKIN, 2010. Testing long run relationship between stock market and macroeconomic variables in the presence of structural breaks: The Turkish case. International research journal of finance and economics, 48. ISSN: 1450-2887.
    8. DICKEY, D. A. and W. A. FULLER, 1979. Distribution of the estimators for autoregressive time series with unit root test. Journal of the American statistical association, 366(74), 427 - 431. ISSN: 0162-1459. Go to original source...
    9. DWYER, G. P. and R. W. HAFER, 1999. Are money growth and inflation still related?. Economic review. Federal reserve bank of Atlanta.
    10. ENDERS, W., 1995. Applied econometric time series. New York: John Wiley & Sons.
    11. FAMA, E. F., 1981. Stock returns, real activity, inflation and money. The American Economic review, 71(4), 45-565.
    12. FAMA, E. F. and G. W. SCHWERT, 1977. Asset returns and inflation. Journal of financial economics, Vol. 5, 115-146. ISSN: 0304-405X. Go to original source...
    13. FEDERAL RESERVE SYSTEM (FED), 2011. Money stock measures. [online]. Boards of governors of the Federal reserve System [online]. [cit. 6th October 2011]. Accessible from: http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
    14. FLANNERY, M. J. and A. PROTOPAPADAKIS, 2002 Macroeconomic factors do influence aggregate stock returns. The review of financial studies, 15(3), 751 - 782. ISSN: 0893-9454. Go to original source...
    15. FORESTI, P., 2007. Testing for Granger causality between stock prices and economic growth. Munich personal RePEc archive, 2962(2007).
    16. FRED, 2012. Federal reserve bank of St. Louis [online]. [cit. 17th January 2012]. Accessible from: http://research.stlouisfed.org/fred2/graph/?id=BASE
    17. GUPTA, M. C., 1974. Money supply and stock market: A probabilistic approach. Journal of finance and quantitative analysis, 9(1). ISSN: 0022-1090. Go to original source...
    18. HABIBULLAH, M., 1998. Money, output, stock prices in Malaysia. Borneo review.
    19. HABIBULLAH, M. S. and A. Z. BAHARUMSHAH, 1996. Money, output and stock prices in Malaysia. International economic Journal [online]. 10(2), [cit. 11th January 2012]. Accessible from: http://147.46.167.195/~kiea/IEJ/vol10_2/Su7.pdf Go to original source...
    20. HAMILTON, J. D. and A. M. HERRERA, 2000. Oil shocks and aggregate macroeconomic behaviour. University of San Diego [online]. [cit. 16th May 2012]. Accessible from: http://dss.ucsd.edu/~jhamilto/bgwjun01.pdf
    21. HANOUSEK, J. and R. K. FILER, 2000. The relationship between economic factors and equity markets in Central Europe. Economics of transition, 8 (3), 623-638. ISSN: 1468-0351. Go to original source...
    22. HUSAIN, F. and T. MAHMOOD, 1999. Monetary expasion and stock returns in Pakistan. The Pakistan Development review, 769 - 776. ISBN: 969-461-065-6. Go to original source...
    23. CHROMEC, M., 2006. Dlouhodobé efekty monetární politiky: může ČNB ovlivnit ekonomický růst? Brno: Masarykova univerzita - Centrum výzkumu konkurenční schopnosti české ekonomiky [online]. [cit. 6th December 2011]. ISSN: 1801-4496. Accessible from: http://is.muni.cz/do/1456/soubory/oddeleni/centrum/papers/wp2006-12.pdf
    24. IOANNIDIS, CH. and A. KONTONIKAS, 2006. The impact of monetary policy on stock prices. Journal of Policy Modeling, 30(1), 33-53. ISSN: 0161-8938. Go to original source...
    25. JAFFE, J. F. and G. MANDELKER, 1976. The Fisher effect for risky assets: An empirical investigation. The Journal of finance, 31(2), 447-458. ISSN: 1540-6261. Go to original source...
    26. JENG, C. C., J. S. BUTLER and J. T. LIU, 1990. The informational efficiency of the stock market: The international evidence of 1921 - 1930. Economics letter, 34(2), 157-162. ISSN: 0165-1765. Go to original source...
    27. JOCHEC, L., 2010. Analýza závislostí ve vývoji akciových trhů a ekonomiky. Brno: Mendelova univerzita v Brně.
    28. KANDIR, S. Y., 2008. Macroeconomic variables, firm characteristic and stock returns: evidence from Turkey. International research journal of finance and economics, Issue 16. ISSN: 1450-2887.
    29. KERAN, M. W., 1971. Expectations, money and the stock market. Federal reserve bank of St. Louis. Go to original source...
    30. KIMURA, T. and T. KORUZOMI, 2003. Optimal monetary policy in a micro-founded model with parametr uncertainty. Finance and economics discussiom series. Board of Governors of the Federal Reserve System (U.S.).
    31. KING, B., 1966. Market and industry factors in stock price behaviour. Journal of business, Vol. 39, 139 - 190. ISSN: 0021-9398. Go to original source...
    32. KOHOUT, P., 2010. Investiční strategie pro třetí tisíciletí. 6. vyd. Praha: Grada Publishing. ISBN: 978-80-247-3315-9.
    33. KRAFT, J. and A. KRAFT, 1977. Determinants of commonstock price: a time series analysis. The journal of finance, 32(2), 417 - 425. ISSN: 1540-6261. Go to original source...
    34. KULHÁNEK, L. a S. MATUZSEK, 2006. Peněžní zásoba a vývoj akciových trhů v České republice, Slovenské republice a ve vybraných zemích. In: Mezinárodní vědecká konference Národohospodárskej fakulty Ekonomické univerzity v Bratislavě "Znalostná ekonomika - nové výzvy pre nárohospodársku vedu". Bratislava: Ekonomická univerzita v Bratislavě.
    35. KUMAR, A., 2011. An empirical analysis of causal relationship between stock market and macroeconomic variables in India. International Journal of Computer Science & Management Studies, 11(01). ISSN: 2231-5268.
    36. MALLIARIS, A. G. and J. L. URRUTIA, 1991. An empirical investigation among real monetary and financial variables. Economics letter, 37(2), 151-158. ISSN: 0165-1765. Go to original source...
    37. MASKAY, B., 2007. Analyzing the Effect of Change in Money Supply on Stock Prices, The Park Place Economist, 15(1), 72 - 79. ISSN: 0736-8631.
    38. MAYSAMI, R. C. and T. S. KOH, 2000. A Vector Error Correction Model of the Singapore Stock Market. International Review of Economics and Finance, 9(1), 79 - 96. ISSN: 1059-0560. Go to original source...
    39. MAYSAMI, R. C., L. C. HOWE and M. A. HAMZAH, 2004. Relationship between mocroeconomic variables and stock market indices: cointegration evidence from stock exchange of Singapore's all-s sector indices. JournalPengurusan, [online]. [cit. 15th January 2012]. Accessible from: http://www.ukm.my/penerbit/jurnal_pdf/Jp24-03.pdf
    40. MOOKERJE, R., 1987. Monetary policy and the information efficiency of the stock market: The evidence from many countries. Applied economics, 19(1), 1521 - 1532. ISSN: 1521-1532. Go to original source...
    41. MUSÍLEK, P. Změny makroekonomických veličin a akciové kurzy. Finance a úvěr, 47(3), 150 - 162. ISSN: 0015-1920.
    42. NELSON, C. R., 1976. Inflation and the rates of return on common sock. Journal of finance, 31(2), 471 - 483. ISSN: 1540-6261. Go to original source...
    43. NÝVLTOVÁ, R. a M. REŽŇÁKOVÁ, 2007. Mezinárodní kapitálové trhy: zdroj financování. 1. vyd. Praha: Grada Publishing, a.s. ISBN: 978-80-247-1922-1.
    44. PEARCE, D. K. and V. V. ROLEY, 1985. Stock prices and economic news. The journal of business, 58(1), 49 - 67. ISSN: 1573-0697. Go to original source...
    45. POIRÉ, N. P., 2000. The money effect. Barron's business and financial weekly magazine.
    46. POŠTA, V., 2010. Role fundamentálních faktorů při analýze chování Pražské burzy [online]. Praha: Vysoká škola ekonomická, [cit. 30th November 2011]. Accessible from: www.vse.cz/polek/download.php?jnl=eam&pdf=74.pdf
    47. RAPACH, D. E., M. E. WOHAR and J. RANGVID, 2005. Macro variables and international stock return predictability. International journal of forecasting, 21(1), 137 - 166. ISSN: 0169-2070. Go to original source...
    48. ROZEFF, M. S., 1974. Money and stock prices, Market efficiency and the lag in effect of monetary policy. Journal of Financial Economics, 1(3), 245 - 302. ISSN: 0304-405X. Go to original source...
    49. SEWELL, M., 2001. Longitudinal data analysis.[online]. Cambridge, [cit. 14th Juny 2012]. Accessible from: http://martinsewell.com/causality/Zorn01.pdf
    50. SHAOPING, CH., 2008. Positivist analysis on effect of monetary policy on stock price behaviours. In: Conference on regional economy and sustainable development, 2008. ISBN 978-0-646-50352-3.
    51. SHOSTACK, F., 2003. Making sense of money supply data. [online]. [cit. 13th May 2011]. Accessible from: http://www.wissensnavigator.com/documents/MoneySupplyShostak.pdf
    52. SPRINKEL, B., 1967. Money and stock prices. Illinois: Richard D Irwin. ISBN: 978-0256005134.
    53. THORNTON, D. L. and D. S. BATTEN, 1984. Lag length selection and Granger causality [online]. Federal reserve bank of St. Louis, Working paper 1984-001A. [cit. 4th Juny 2012]. Accessible from: http://research.stlouisfed.org/wp/1984/1984-001.pdf
    54. TOMŠÍK, V. a D. VIKTOROVÁ, 2005. Peníze a hospodářský růst v české republice - je mezi nimi vztah? [online]. Praha: Vysoká škola ekonomická, [cit. 2ns November 2011]. Accessible from: http://panda.hyperlink.cz/cestapdf/pdf05c4/tomsik.pdf
    55. URBAIN, J. P., 1989. Model selection criteria and Granger causality test. University of Liége, Holland, 1989. Economics Letter, 29(4), 317 - 320, ISSN: 0165-1765. Go to original source...
    56. VESELÁ, J., 2007. Investovaní na kapitálových trzích. Praha: ASPI, a. s. ISBN: 978-80-7357-297-6.
    57. VESELÁ, J., 2010. Český kapitálový trh pohledem globální fundamentální analýzy. In: Evropské finanční systémy 2010. Brno: Masarykova univerzita. ISBN: 978-80-210-5182-9.

    Return to the content