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Monetary Policy Tightening and Stock Market Indices: A Comparative Study of the United States and the European Union

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Title: Monetary Policy Tightening and Stock Market Indices: A Comparative Study of the United States and the European Union
Authors: Anđelinović, Mihovil, Pavković, Ana
Publisher Information: 2025.
Publication Year: 2025
Subject Terms: monetary policy tightening, Euro Stoxx 50, inflation, interest rate, stock market indices, S&P 500
Description: Monetary policy in both the European Union and the United States significantly influences economic conditions and stock market behaviour. This study examines the roles of the European Central Bank (ECB) and the Federal Reserve System (Fed) from 2008 to 2024, highlighting their responses to economic crises and inflation. Both institutions aimed to achieve price stability, economic growth, and full employment through measures like open market operations, asset purchases, and adjusting interest rates. During crises such as the global financial crisis and the COVID-19 pandemic, the ECB and the Fed employed expansionary monetary policies, including near-zero interest rates and quantitative easing. Conversely, starting in 2021, the Fed raised interest rates to curb inflation, influencing borrowing costs and investment decisions. The analysis demonstrates a strong correlation between interbank interest rates and stock market indices in both regions, showcasing the substantial impact of monetary policy on investor sentiment and asset valuations. These dynamics are particularly noticeable during monetary tightening or easing, affecting economic growth and stock market performance. Notably, from late 2022 to May 2024, despite successive interest rate hikes, the Euro Stoxx 50 and S&P 500 indices exhibited resilience and positive trends. This period highlighted the complex interplay between interest rates and market movements, driven by factors like sector-specific performances, geopolitical developments, and macroeconomic indicators. Sectors less sensitive to interest rate changes, such as technology, performed well, bolstering overall market sentiment. This study underscores the necessity for stakeholders to understand these relationships to anticipate market reactions and adjust investment strategies effectively. Policymakers also rely on such insights to assess the broader economic impact of their decisions, revealing the adaptability of financial markets in navigating varying economic conditions.
Document Type: Conference object
Accession Number: edsair.dris...01492..8623813bb6cd38a36c11f81e8f36722f
Database: OpenAIRE
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Items – Name: Title
  Label: Title
  Group: Ti
  Data: Monetary Policy Tightening and Stock Market Indices: A Comparative Study of the United States and the European Union
– Name: Author
  Label: Authors
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  Data: <searchLink fieldCode="AR" term="%22Anđelinović%2C+Mihovil%22">Anđelinović, Mihovil</searchLink><br /><searchLink fieldCode="AR" term="%22Pavković%2C+Ana%22">Pavković, Ana</searchLink>
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  Label: Publisher Information
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  Data: 2025.
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  Label: Publication Year
  Group: Date
  Data: 2025
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  Data: <searchLink fieldCode="DE" term="%22monetary+policy+tightening%22">monetary policy tightening</searchLink><br /><searchLink fieldCode="DE" term="%22Euro+Stoxx+50%22">Euro Stoxx 50</searchLink><br /><searchLink fieldCode="DE" term="%22inflation%22">inflation</searchLink><br /><searchLink fieldCode="DE" term="%22interest+rate%22">interest rate</searchLink><br /><searchLink fieldCode="DE" term="%22stock+market+indices%22">stock market indices</searchLink><br /><searchLink fieldCode="DE" term="%22S%26P+500%22">S&P 500</searchLink>
– Name: Abstract
  Label: Description
  Group: Ab
  Data: Monetary policy in both the European Union and the United States significantly influences economic conditions and stock market behaviour. This study examines the roles of the European Central Bank (ECB) and the Federal Reserve System (Fed) from 2008 to 2024, highlighting their responses to economic crises and inflation. Both institutions aimed to achieve price stability, economic growth, and full employment through measures like open market operations, asset purchases, and adjusting interest rates. During crises such as the global financial crisis and the COVID-19 pandemic, the ECB and the Fed employed expansionary monetary policies, including near-zero interest rates and quantitative easing. Conversely, starting in 2021, the Fed raised interest rates to curb inflation, influencing borrowing costs and investment decisions. The analysis demonstrates a strong correlation between interbank interest rates and stock market indices in both regions, showcasing the substantial impact of monetary policy on investor sentiment and asset valuations. These dynamics are particularly noticeable during monetary tightening or easing, affecting economic growth and stock market performance. Notably, from late 2022 to May 2024, despite successive interest rate hikes, the Euro Stoxx 50 and S&P 500 indices exhibited resilience and positive trends. This period highlighted the complex interplay between interest rates and market movements, driven by factors like sector-specific performances, geopolitical developments, and macroeconomic indicators. Sectors less sensitive to interest rate changes, such as technology, performed well, bolstering overall market sentiment. This study underscores the necessity for stakeholders to understand these relationships to anticipate market reactions and adjust investment strategies effectively. Policymakers also rely on such insights to assess the broader economic impact of their decisions, revealing the adaptability of financial markets in navigating varying economic conditions.
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      – Text: Undetermined
    Subjects:
      – SubjectFull: monetary policy tightening
        Type: general
      – SubjectFull: Euro Stoxx 50
        Type: general
      – SubjectFull: inflation
        Type: general
      – SubjectFull: interest rate
        Type: general
      – SubjectFull: stock market indices
        Type: general
      – SubjectFull: S&P 500
        Type: general
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      – TitleFull: Monetary Policy Tightening and Stock Market Indices: A Comparative Study of the United States and the European Union
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            NameFull: Anđelinović, Mihovil
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            NameFull: Pavković, Ana
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              Type: published
              Y: 2025
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