RBA Annual Conference – 2003 Stock Market Volatility and Monetary Policy: What the Historical Record Shows

Table 10: Effect of Monetary Policy, Exchange Rate (EX) Regimes and Capital Controls on Stock Return Standard Deviation
Australia Canada Denmark Finland France Italy Japan Sweden Switzerland UK US
Money supply 0.186
(0.060)
1.229
(0.189)
−0.052
(0.037)
0.487
(0.056)
0.411
(0.063)
0.842
(0.094)
0.260
(0.047)
−0.123
(0.048)
2.461
(0.340)
0.274
(0.042)
−0.309
(0.153)
Fixed EX regime −2.310
(0.096)
−0.538
(0.050)
−2.057
(0.247)
−1.349
(0.408)
−2.311
(0.154)
−0.053
(0.128)
−1.355
(0.288)
−0.282
(0.104)
0.431
(0.232)
−1.300
(0.141)
−0.644
(0.069)
Intermediate
EX regime
−0.948
(0.137)
0.785
(0.064)
0.209
(0.252)
−2.115
(0.389)
−1.995
(0.165)
1.228
(0.129)
0.198
(0.270)
1.974
(0.110)
0.369
(0.206)
1.835
(0.149)
0.940
(0.168)
Capital controls 1.794
(0.106)
−0.237
(0.044)
−0.719
(0.099)
−1.467
(0.220)
1.537
(0.114)
−0.581
(0.114)
−0.511
(0.273)
−0.859
(0.082)
−0.867
(0.119)
1.820
(0.085)
Dropped
Constant 4.430
(0.156)
2.761
(0.226)
5.044
(0.288)
7.397
(0.452)
5.343
(0.207)
4.313
(0.218)
5.380
(0.145)
4.441
(0.120)
1.640
(0.397)
3.196
(0.148)
4.872
(0.138)
R2 0.40 0.50 0.51 0.26 0.38 0.25 0.10 0.47 0.19 0.67 0.18

Notes: Standard errors in parentheses. Money supply is at annual frequency.

Source: Authors' calculations