“U.S. Stocks Rise on ECB Stimulus Hopes”

Since the European Central Bank’s President, Mario Draghi, reiterated the ECB’s unanimous commitment to stimulus growth in the region, stocks have been rising in the United States. Ian Winer states, “There’s a massive liquidity being pumped into the market”. That is what generates an underlying bid for stocks. According to our ISLM model, this shifts the money demand curve to the right and increases income. Although stocks are not investment in our model, we can see an affect with the increase in money demand. U.S. stocks also rallied last Friday when the Bank of Japan made a surprise decision to increase its stimulus measures. An increase in the value of stocks is a good sign for our economy.