Monetary Policy Uncertainty and Changes in US Stock Market: Evidence from USD and Stock Index

According to the U.S. monetary policy keep changing these years, these changes may cause some effect on the U.S. stock market, investors are looking for a investigation on these changes. As the biggest stock market in the world, the U.S. stock market is a large system that may entail many statistics to find out whether monetary uncertainty does change the stock market in stock index. In this paper, two of well-known stock markets are chosen and daily stock data from June 1, 2021 to September 14, 2022 is extracted as well as USD index through that period. The VAR model was applied in the study to evaluate the link between variables, and the ARMA-GARCH model was used to determine and analyze both earning ability and stock volatility throughout the monetary uncertainty. Interestingly, two large stock markets have different response to the USD index. The study forecasts the possible future of the stock market fluctuation and provides managerial and investment recommendations to its stakeholders.