Monetary Policy and the Stock Market: Analysis and Proposals

ABSTRACT: The evolution of monetary policy in recent years can probably be explained by the different characteristics of the behavior of monetary policy transmission mechanisms in relation to changes in the structure of financial systems. These changes are related to developments in the international financial and economic environment. In particular, the development and liberalization of financial markets, the deregulation of the financial system and the emergence of financial innovations. Our literature review aims to identify the main findings of rigorous studies on the link between the stock market and monetary policy. In this article, we extend this intuition by trying to understand the mechanisms through which monetary policy influences stock market prices.