The Interplay Between Central Bank Monetary Policies and Stock Market Volatility in a Globalized Economy

Abstract

This study explores the relationship between central bank monetary policies and stock market volatility in a globalized economy. The paper examines how various monetary tools, such as interest rates, quantitative easing, and reserve requirements, influence stock market behavior. In a highly interconnected global economic system, central bank policies in one country can have significant repercussions for financial markets worldwide. The research investigates the short- and long-term effects of central bank actions on stock market volatility, utilizing both historical data and modern econometric techniques. By analyzing data from developed and emerging economies, the study finds that while central bank policies have a direct impact on stock market stability, the degree of influence varies across regions. Furthermore, this paper highlights the role of investor sentiment, global trade dynamics, and financial market integration in amplifying or mitigating volatility. The findings underscore the importance of coordinated monetary policy efforts in managing market stability in an increasingly globalized financial ecosystem.