Stock Market Response to Quantitative Easing: Evidence from the Novel Rolling Windows Nonparametric Causality-in-Quantiles Approach
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Tarih
2023
Dergi Başlığı
Dergi ISSN
Cilt Başlığı
Yayıncı
Springer
Erişim Hakkı
info:eu-repo/semantics/embargoedAccess
Özet
The US Federal Reserve has been using quantitative easing as an unconventional
monetary policy tool for providing liquidity and credit-market facilities to banks,
and undertaking large-scale asset purchases in periods of crisis. This study carefully
examines whether the US stock market has been responsive to the use of quantitative easing over time. A major contribution of this study to the extant literature is
the introduction of the novel rolling windows nonparametric causality-in-quantiles
approach to studying the reaction of the stock market to quantitative easing. This
approach provides a means of investigating the time-varying causality between the
variables across quantiles. The standard nonparametric causality-in-quantiles test
results show that stock market performance is signifcantly predicted by quantita tive easing, except at very low and very high levels of stock returns (volatility). The
rolling windows nonparametric causality-in-quantiles test results indicate that the
causal efect of quantitative easing on stock market volatility and returns becomes
pronounced during periods of crisis. The reactions are most signifcant in periods corresponding to the Asian fnancial crisis, the global fnancial crisis and the
COVID-19 pandemic outbreak. Overall, the causal efect of quantitative easing on
both stock market returns and volatility changes through time; the efect on stock
market returns is also greater than on stock market volatility.
Açıklama
Anahtar Kelimeler
Quantitative easing, Stock market, Rolling windows, Nonparametric, causality-in-quantiles, USA
Kaynak
Computational Economics
WoS Q Değeri
Q2
Scopus Q Değeri
N/A
