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    Response of Stock Markets to Monetary Policy: An Asian Stock Market Perspective

    Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad; Hassanzadeh, Ali; Prasetyo, Ahmad Danu | September 2014
    Abstract
    We estimate the response of Asian stock market prices to exogenous monetary policy shocks using a vector error correction model. In our paper, monetary policy transmits to stock market price through three routes: money by itself, exchange rate, and inflation. Our result points to the fact that stock prices increase persistently in response to an exogenous easing monetary policy. Variance deposition results show that, after 10 periods, the forecast error variance of beyond 53% of the Tehran Stock Exchange Price Index (TEPIX) can be explained by exogenous shocks to the US dollar–Iranian rial exchange rate, while this ratio for exogenous shocks to Iranian real gross domestic product was only 17%. We argue that such evidence can be accounted for by an endogenous response of the stock prices to the monetary policy shocks.
    Citation
    Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad; Hassanzadeh, Ali; Prasetyo, Ahmad Danu. 2014. Response of Stock Markets to Monetary Policy: An Asian Stock Market Perspective. © Asian Development Bank Institute. http://hdl.handle.net/11540/1101. License: CC BY-NC-ND 3.0 IGO.
    Keywords
    Development
    Finance
    Development Challenges
    Development Issues
    Development Problems
    Microenterprises Finance
    Commercial Finance Companies
    Enterprise Financing
    Financial Analysis
    Banking Finance And Investment
    ADB
    Project finance
    Development plans
    Strategic planning
    Business Financing
    Investment Requirements
    Insurance Companies
    International Monetary Relations
    International Financial Market
    Exchange Rate
    Insurers
    Insurance stocks
    Insurance holding companies
    Insurance carriers
    Insurance agencies
    Business subsidies
    Investment companies
    International banks and banking
    Stock exchanges
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    Citable URI
    http://hdl.handle.net/11540/1101
    Metadata
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    Author
    Yoshino, Naoyuki
    Taghizadeh-Hesary, Farhad
    Hassanzadeh, Ali
    Prasetyo, Ahmad Danu
    Theme
    Development
    Finance

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    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise