Money supply announcements and stock prices : the UK evidence

Abstract

The question of monetary policy and specifically of money supply changes on asset prices have been
well researched on both sides of the Atlantic. Money supply announcements provide us with a unique
opportunity to study the above by avoiding the problem of endogeneity. UK data are used to investigate
the effects of money supply announcements on stock returns. It is found that unexpected changes in the
money supply have a significant effect on asset prices. These results are in accordance with the results
obtaines by using American data.