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The effect of investors' confidence on monetary policy- economic growth relationship: a Multivariate GARCH approach

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  • Ege Yazgan

Abstract

The financial stability's effects on the monetary policy transmission mechanisms are investigated. Specifically, the heteroskedasticity of the errors is exploited, in a MGARCH, to obtain endogenously estimated measures of uncertainty. A two steps estimator of a Multivariate GARCH-in-mean model highlights the indirect effects of monetary growth on financial markets at different time horizons. The estimates, although preliminary in line with who views the "Great Moderation" as the main cause of the financial crises, lead to reversed results once avoided spurious regression problems, accounting for permanent changes in the monetary policy (structural breaks in the variances ‘series).

Suggested Citation

  • Ege Yazgan, 2014. "The effect of investors' confidence on monetary policy- economic growth relationship: a Multivariate GARCH approach," BIFEC Book of Abstracts & Proceedings, Research and Business Development Department, Borsa Istanbul, vol. 1(2), pages 82-109, March.
    • Handle: RePEc:bor:bifeca:v:1:y:2014:i:2:p:82-109
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    More about this item

    Keywords

    Financial Stability; PEG; Monetary Policy; Uncertainty; Multivariate GARCH-in-mean.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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