Stock prices have also been known to swing rather widely, leading to concerns about possible "bubbles" or other deviations of stock prices from fundamental values that may have adverse implications for the economy. It is of great interest, then, to understand more precisely how monetary policy and the stock market are related.
In my talk today, I will report the results of research that I have done on this topic with Kenneth Kuttner of the Federal Reserve Bank of New York, as well as the findings of some related work done both 1 within and outside the Federal Reserve System.