Monetary policy as market stabilizer in the COVID-19 pandemic

Yajun Xiao, Yang Chen, Yimin Shan

Research output: Contribution to journalArticlepeer-review


We categorize expansionary monetary policies based on interest rates, monetary easing, and liquidity decisions. We find that the stock market reacts positively to liquidity policy announcements by a more significant margin during and after the COVID-19 at market and industry levels compared with reactions to interest rate or monetary easing policy announcements. The economic consequences are large and persistent. Using firm characteristics as proxies for monetary policy transmission channels, we find that at firm level, the positive responses to liquidity policy announcements during the crisis are more pronounced for small and medium-sized businesses and non-state-owned enterprises relative to other enterprises.

Original languageAmerican English
Article number103960
JournalFinance Research Letters
Publication statusPublished - Jul 2023


  • Chinese monetary policy
  • Event study
  • Monetary policy transmission channels
  • Stock market


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