經濟與管理論叢(Journal of Economics and Management)  
  Volume 11, No. 2  
  July, 2015  
     
 

Intertemporal Substitution Effect of Consumption,

 
  Macroeconomic Policy Announcements and the
Dynamic Adjustment of Stock Prices
 
     
 

Peir-Shyan Liaw

 
  Department of Economics, Tunghai University, Taiwan  
   
 

Abstract

 

This paper presents a macroeconomic model in a closed economy based on the framework developed by Blanchard (1981), Laban and Larrain (1994), Obstfeld (1994), Barro (1997), Lai (2011), Lai and Fang (2012), and others. In view of the intertemporal substitution effect of consumption, the free adjustment of full employment output and commodity prices and the instantaneous adjustment assumption of commodity prices, the model uses the announcement effect approach of rational expectations to investigate the dynamic adjustment pattern of stock prices. This paper concludes that if the policy authority executes the monetary policy announcement, then the chip effect, the liquidity effect, the dividend effect, the sign and magnitude of the slope between the two unstable arms and the time lag between the policy’s announcement and execution are the key factors influencing the dynamic adjustment pattern of the stock price.

   

 

 

Keywords: intertemporal substitution effect of consumption, chip effect,

 
                   liquidity effect, dividend effect, asset substitution degree,  
                   mis-adjustment  

 

JEL classification: E62, F31, F41

 

 
   

 

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