Impact of Monetary Policy on Financial Markets Efficiency under Speculative Bubbles: a Non-Normal and Non-Linear Entropy-based Approach


  • Angélica Alonso-Rivera Instituto Politécnico Nacional
  • Salvador Cruz-Aké Instituto Politécnico Nacional
  • Francisco Venegas-Martínez Instituto Politécnico Nacional


Palabras clave:

Monetary policy, speculative bubbles, market efficiency, non-linear models, entropy.


This paper examines, through the concept of mutual information based on Shannon’s entropy, the impact of monetary policy on the loss of efficiency in the financial markets due to speculative bubbles. The proposed information measure is useful to quantify the efficiency with which stock markets respond to the implementation of monetary policy. The findings show that an increase in both money supply and credit growth, as well as declining interest rates, lead to strong market inefficiencies during the initial periods of formation of a bubble. Moreover, empirical evidence suggests that when a loose monetary policy (money supply is expanded and is accessible to agents to encourage economic growth) generates inefficiencies, its instruments are not effective to realign the performance of financial markets.
JEL Classification: E5, G14, D84, C60.


Los datos de descargas todavía no están disponibles.

Biografía del autor/a

Angélica Alonso-Rivera, Instituto Politécnico Nacional

Instituto Politécnico Nacional

Salvador Cruz-Aké, Instituto Politécnico Nacional

Instituto Politécnico Nacional

Francisco Venegas-Martínez, Instituto Politécnico Nacional

Instituto Politécnico Nacional


Ahearne, A. G., J. Ammer, B. M. Doyle, L. S. Kole and R. F. Martin (2005). “House Prices and Monetary Policy: A Cross-Country Study”. International Finance Discussion Papers No. 841. Board of Governors of the Federal Reserve System.

Álvarez-Ramirez, J., E. Rodríguez, and J. Álvarez (2012). “A Multiscale Entropy Approach for Market Efficiency”. International Review of Financial Analysis, 21(C): 64-69.

Aoki, K., J. Proudman, and G. Vlieghe, (2004). “House Prices, Consumption, and Monetary Policy: A Financial Accelerator Approach”. Journal of Financial Intermediation, 13(4): 414-35.

Bordo, M. D. and J. Landon-Lane (2013). “Does Expansionary Monetary Policy Cause Asset Price Booms; Some Historical and Empirical Evidence”. Working Paper 19585. National Bureau of Economic Research.

Calza, A, T. Monacelli, and L. Stracca (2009). “Housing Finance and Monetary Policy”, Working Paper Series no. 1069, European Central Bank, July.

Case, K. E., & Shiller, R. J. (2003). “Is There a Bubble in the Housing Market?”, Brookings Papers on Economic Activity, 2: 299-342. DOI: 10.1353/eca.2004.0004

Christiano, L., C. L. Ilut, R.Motto, and M. Rostagno (2010). “Monetary Policy and Stock Market Booms”, Working Paper 16402. National Bureau of Economic Research. (DOI): 10.3386/w16402

Chuang, W. I., & Lee, B. S. (2006). “An Empirical Evaluation of the Overconfidence Hypothesis”. Journal of Banking and Finance, 30(9): 2489-2515.

Cruz-Aké, S., R. S. García-Ruiz y F. Venegas-Martínez (2014). “Una medición no lineal de la dependencia de la inflación sobre el tipo de cambio nominal (passthrough)”. El Trimestre Económico, Vol. 82, no. 325, pp. 211-244, enero-marzo.

Darbellaya, G. A., D. Wuertzc. (2000) “The Entropy as a Tool for Analysing Statistical Dependences in Financial Time Series”. Physica A, no. 287, pp. 429-439.

Delgado-Selley, O. (2011). La hipótesis de la inestabilidad financiera y la crisis de 2007-2009. Economía, Teoría y Práctica, no. 34, pp. 9-41.

Detken, C. and F. R. Smets (2004). “Asset Price Booms and Monetary Policy”. Working Paper Series No. 364. European Central Bank.

Dionisio A., R. Menezes, and D. A. Mendes. (2004). “Mutual Information: A Measure of Dependency for Nonlinear Time Series”. Physica A, 344(1-2): 326–329.

Dokko J., B. Doyle, M. T. Kiley, J. Kim, S. Sherlund, J. Sim, and S. Van den Heuvel.(2009). “Monetary Policy and the Housing Bubble”. Finance and Economics Discussion Series. Divisions of Research & Statistics and Monetary Affairs. Washington, D. C.: Federal Reserve Board.

Fama, E. F. (1970). “Efficient Capital Markets: A Review of Theory and Empirical Work”. The Journal of Finance, 25(2): 383-417.

Flood, R. P., & Hodrick, R. J. (1990). “On Testing for Speculative Bubbles”. The Journal of Economic Perspectives, 4(2), 85-101. DOI: 10.1257/jep.4.2.85

Galí, J. (2013). “Monetary Policy and Rational Asset Price Bubbles”. Working Paper 18806.Cambridge, M.A.: National Bureau of Economic Research. DOI:10.1257/aer.104.3.721

García Kobeh A., Graf Noriega J., Hernández Chávez, G. y Paniagua Ruiz R. (1991) “Economía monetaria de producción y circuito”. Economía Teoría y Práctica, Nueva época, no 1, pp. 149-170.

Gilchrist, S., and M. Saito (2006). “Expectations, Asset Prices, and Monetary Policy: The Role of Learning”, Working Paper 12442. National Bureau of Economic Research.

Greenspan, A. (2004). “Innovations and Issues in Monetary Policy: The Last Fifteen Years Risk and Uncertainty in Monetary Policy”. American Economic Review, 94(2): 33-40.

Lavoie, M. (2007). “Endogenous Money: Accommodationist” in P. Arestis and M. Sawyer (edits.) A Handbook of Alternative Monetary Economics. Northampton, MA.: Edward Elgar Publishing.

Lux, T. (1995). “Herd Behaviour, Bubbles and Crashes”. The Economic Journal, 105(431): 881-896.

Minsky, H. P. (1992). “The Financial Instability Hypothesis”, Working Paper no. 74. The Jerome Levy Economics Institute.

Mishkin, F. S. (2011). “How Should Central Banks Respond to Asset-Price Bubbles? The “Lean” versus “Clean” Debate after the GFC”. RBA Bulletin. Reserve Bank of Australia, June quarter.;jsessionid=6B7177B427CB503517B207D77CDD076B?doi=

Risso, Wiston Adrián (2008), The US Housing Bubble and the Informational Efficiency. Available at SSRN: DOI:




Cómo citar

Alonso-Rivera, A., Cruz-Aké, S., & Venegas-Martínez, F. (2019). Impact of Monetary Policy on Financial Markets Efficiency under Speculative Bubbles: a Non-Normal and Non-Linear Entropy-based Approach. Análisis Económico, 34(86), 157–178.

Artículos más leídos del mismo autor/a