The Impact of Monetary Policy on Stock Market Volatility: Evidence from Advanced Economies
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Abstract
The impact of monetary policy on stock market volatility in advanced economies. Using a panel dataset comprising several advanced economies over a specific time period, we employ various econometric techniques to analyze the relationship between monetary policy actions and stock market volatility. Our findings suggest that changes in monetary policy, such as interest rate adjustments or quantitative easing measures, have a significant influence on stock market volatility. Specifically, we observe that expansionary monetary policies tend to decrease stock market volatility, while contractionary policies often lead to increased volatility. Furthermore, we explore the transmission mechanisms through which monetary policy affects stock market volatility, considering factors such as investor sentiment, risk perception, and macroeconomic conditions. Our research contributes to the existing literature by providing empirical evidence on the dynamic interplay between monetary policy and stock market volatility in advanced economies, with implications for policymakers, investors, and financial market stability.
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