Asymmetric effect of monetary policy on Indian stock market sectors: Do monetary policy stimulus transpire the same effect on all sectors?

Tomar, Kunwar Sanjay; Kesharwani, Subodh

doi:10.1080/23322039.2021.1999058

Cited by 4 publications

(2 citation statements)

References 88 publications

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“…This result suggests that a one per cent increase in INF would result in a 590 per cent increase in TN. The results are compatible with the hypothesis of Fisher (Tomar & Kesharwani, 2022), while they contradict the findings of Fama (1981). The results in Iraq may have the following explanations.…”

Section: Discussion Of Resultssupporting

confidence: 70%

Stock Market Response to Monetary Policy: Evidence from Iraq

Babela,

Doski

2023

ECO

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The current study seeks to assess the influence of monetary policy carried out by the Central Bank of Iraq (CBI henceforth) on stock market performance (SMP henceforth) from 2008 to 2021. Three monetary policy variables have been considered: money supply, inflation, and interest rate. Meanwhile, the number of transactions has measured the Iraqi Stock Exchange Market (ISX henceforth) performance. This study has used the Autoregressive Distributed Lag (ARDL henceforth) model by utilising monthly data. The results show that in the long term, the money supply and interest rates both have a negative impact on ISX performance. On the other hand, the findings have reported that inflation significantly and positively affects ISX performance. However, there was no indication of a relationship among the underlying variables in the short term. For investors and the appropriate authorities, these findings may have important implications.

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Section: Discussion Of Resultssupporting

confidence: 70%

Stock Market Response to Monetary Policy: Evidence from Iraq

Babela,

Doski

2023

ECO

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“…Empirical studies that analyze the factors that influence fluctuations in stock markets in several countries have been carried out by previous economists, such as monetary policy factors (Mishkin, 1978;Majid and Yusof, 2009;Gregoriou et al, 2009;Laopodis, 2010;Hojat and Sharifzadeh, 2017;Suriani et al, 2021;Tomar and Kesharwani, 2022). In addition to monetary policy, the source of economic fluctuations that is considered important is uncertainty (Bloom, 2009;Christiano et al, 2014;Gilchrist et al, 2014;Dery and Serletis, 2021).…”

Section: Introductionmentioning

confidence: 99%

Causality between Green Stock Market with Monetary Policy, Global Uncertainty, and Environmental Damage in Indonesia

Sakuntala

Majid

Aliasuddin

et al. 2022

IJEEP

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The study examines the effect of monetary policy, global uncertainty and environmental damage on the green stock market in Indonesia in the long and short term, using the Autoregressive Distributed Lag (ARDL) bound test method. The ARDL bound test results show that there is cointegration in the long term between the green stock market and monetary policy, global uncertainty and environmental damage. Empirical evidence finds that in the long term, the variables that affect the green stock market in Indonesia are monetary policy from interest rates, global uncertainty and environmental damage from carbon emissions. While in the short term the variables that affect the green stock market are interest rates without lag, lag 1, lag 2 and lag 3; global uncertainty in lag 1 and lag 2; and carbon emissions without lag and lag 1; while forest damage without lag shows a very weak effect at the 10% significance level. Coefficient also shows significant and negative sign. A deeper analysis found that there is a bidirectional causality from monetary policy to green stock markets and vice versa, and from carbon emissions to green stock markets and vice versa.

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Dynamic linkages between the monetary policy variables and stock market in the presence of structural breaks: evidence from India

Moizz,

Akhtar

2024

AJEB

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PurposeThe study aims to determine the long and short-term causal relationships between the variables associated with the adjustment of monetary policy and the stock market in India in the presence of structural breaks.Design/methodology/approachThe study employed the autoregressive distributed lag (ARDL) bounds test and the Error Correction Model to assess long- and short-term causal relationships. The study also used non-frequentist Bayesian inferences for the validity of estimation robustness. The Bai–Perron test is used to identify breakpoint dates for the Indian stock market index, and the Granger Causality test is employed to ascertain the direction of causality.FindingsThe F-bounds test reveals cointegration among the variables throughout the examined period. Specifically, the weighted average call money rate (WACR), inflation (WPI), currency exchange rate (EXE), and broad money supply (M3) exhibit statistical significance with precise signs. Furthermore, the study identifies the negative impact of the COVID-19 outbreak in March 2020 on the Indian stock market.Research limitations/implicationsAlthough the study provides significant insights, it is not exempt from constraints. A significant limitation is selecting a relatively limited time period, specifically from April 2008 to September 2023. The limited time frame of this study may restrict the applicability of the results to more comprehensive economic settings, as dynamics between the monetary policy and the stock market can be influenced by multiple factors over varying time periods. Furthermore, the utilisation of the Weighted Average Call Money Rate (WACR) rather than policy rates such as the Repo rate presents an additional constraint as it may not comprehensively account for the impacts of particular policy initiatives, thereby disregarding essential complexities in the connection between monetary policy variables and financial markets.Practical implicationsThe findings of the study suggest that investors and portfolio managers should consider economic issues while developing long-term investing plans. Reserve Bank of India should exercise prudence to prevent any discretionary measures that may lead to a rise in interest rates since this adversely affects the stock market. To mitigate risk, investors should closely monitor the adjustment of monetary policy variables.Social implicationsThe study has important social implications, especially regarding the lower levels of financial literacy among investors in India. Considering the complex nature of the study’s emphasis on monetary policy adjustments and their impact on the stock market. Investors face the risk of significant losses due to unexpected adjustments in monetary policy. Many individuals may need help understanding how policy changes impact their investments. Therefore, RBI must consider both price and financial stability when formulating monetary policies. Furthermore, market participants should consider the potential impact of fluctuating monetary policy variables when devising their long-term investment strategies. Given that adjustments in interest rates can markedly affect stock market dynamics, investors must carefully assess the implications of monetary policy decisions on their portfolios.Originality/valueThe study uses dummy variables in the ARDL model to represent structural breaks that emerged from the COVID-19 pandemic (as determined by the Bai–Perron multiple breakpoint test). The study also used the Perron unit root test to find out the stationary of the series in the presence of structural breaks. Additionally, the study also employed Bayesian inferences to affirm the robustness of the estimates.

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Asymmetric effect of monetary policy on Indian stock market sectors: Do monetary policy stimulus transpire the same effect on all sectors?

Cited by 4 publications

References 88 publications

Stock Market Response to Monetary Policy: Evidence from Iraq

Stock Market Response to Monetary Policy: Evidence from Iraq

Causality between Green Stock Market with Monetary Policy, Global Uncertainty, and Environmental Damage in Indonesia

Dynamic linkages between the monetary policy variables and stock market in the presence of structural breaks: evidence from India

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