State-dependent effects of the unconventional monetary policy in stock markets

Abstract

This study analyzes the state-dependent effect of the Bank of Japan (BoJ)’s intervention in stock markets from 2013 to 2017. A causal inference on such intervention is difficult because of the self-selective behavior of central banks. To address this problem, I apply the propensity score method in a time series context, exploiting stock price information of a single day. The key finding is that the effects are state-dependent and stronger during market downturns.