In this paper we examine the link between stock market uncertainty and monetary policy in the US. There are strong arguments why central banks should account for stock market uncertainty in their strategy. Amongst others, they can maintain the functioning of financial markets and moderate...

During financial crises central banks usually decrease interest rates in order to reduce financial uncertainty. This behavior increases inflation risk. The trade-off between inflation and uncertainty stabilization can be modeled by the generalized Taylor rule, which describes inflation...

This paper investigates the response of US stock market uncertainty to monetary policy of the Federal Reserve Bank. It can be shown that monetary policy significantly Granger-causes stock market confidence. By using monthly closing prices of the V IX as a stock market uncertainty proxy and a...