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Abstract

This paper provides the empirical framework to assess whether UK monetary policy shocks induce both the UK housing market and the UK stock market to remain at a high-volatility risk environment. The Markov regime switching modelling approach is employed in order to identify two distinct environments for each market; namely, a high-risk environment and a low-risk environment, while a probit model is employed in order to test whether monetary policy shocks provide this predictive information regarding the current state of both markets under consideration. Our findings indicate that monetary policy shocks do indeed have predictive power on the stock market. In addition, in both asset markets there is a key role for inflation. Results are important especially within the framework of the inflation targeting monetary policy regime.



Item Type: MPRA Paper -

Original Title: Asset prices regime-switching and the role of inflation targeting monetary policy-

Language: English-

Keywords: United Kingdom, Inflation targeting, Markov regime switching, Forecasting, Asset prices-

Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion ProcessesE - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary PolicyG - Financial Economics > G1 - General Financial Markets-





Author: Chatziantoniou, Ioannis

Source: https://mpra.ub.uni-muenchen.de/68666/



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