Liquidity Injections May Have Driven the Stock Market Recovery
Posted: 14 Jul 2020
Date Written: June 17, 2020
The Fed has responded to sharp drops in stock prices for two decades by pumping massive amounts of liquidity into the economy—creating a not-so-unreasonable expectation that future declines may elicit a similar response. Field and experimental evidence supports the price-raising effect of increased money supply.
Keywords: stock prices, quantitative easing, liquidity, money supply
JEL Classification: E44, E51, E58, G28
Suggested Citation: Suggested Citation