The Impact of Money Supply on Japanesee Stock Bubbles


  • Martin Širůček


stock market, stock bubble, Granger causality, ADF test, Archipelago boom, Heisei boom


Purpose of the article: The present article deals with associations between the development of money supply measured by the monetary base M2 and the development of the Japanesee wider stock index Nikkei 225. The objective of the article is set if the money supply is significant macroeconomic factor which cause the stock bubbles. Methodology/methods: Regarding to the aim of the article was using historic monthly nominal data of money supply (measured with monetary base M2) and monthly close price of Nikkei 225 since 1967 to 2011, adjusted of splites and dividends. This period contain two bubbles which were on japanesee market and the time of economic crisis after 2007. From econometric methods, will be using stationary test – Augmented Dickey-Fuller test, for cointegration between two time series is using Engel-Granger cointegration test and the impact of money supply on japanesee stock index is measured by Granger causality test. Scientific aim: The aim of this article is by using econometric methods find if the nominal money supply, measured by monetary base M2 is a significant factor, which cause the stock bubbles on japanesee stock market. Findings: According to the results of the empirical analysis was found that mnominal money supply represented by wider monetary base M2 is not a significant factor which cause the bubbles, which were identify on japanese stock market in selected period. Concrete wasn’t found the impact of money supply on Archipelago boom in 70th and Heisei boom in the 80th. In empirical analysis was only found a long relationship (cointegration) between money supply and stock index Nikkei 225, what correspond with economic theory. Conclusions: This paper can be expand with real variables (inflation adjusted) and compare the result. Higher potencial of this paper is added there another macroeconomic variables, first of all oil price or producer price index, because according to the literature review this can be a significant factors which cabn cause the bubbles and find relationship between these factors and japanese stock index development. Other way is compare the results with e.g. US capital maret, which suppport the market and economy by quantitative easing too.