Does central bank independence affect stock market volatility?

Papadamou, Stephanos; Sidiropoulos, Moïse; Spyromitros, Eleftherios

doi:10.1016/j.ribaf.2017.07.021

Cited by 24 publications

(15 citation statements)

References 59 publications

(49 reference statements)

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“…Additionally, Eichler and Littke (2018) explored the impact of CBI on exchange rate volatility. Papadamou et al (2017), Daraei (2018), and Garcia and Costa (2019) investigated the relationship between CBI and stock price volatility, while Masciandaro and Passarelli (2019), and Anwar and Suhendra (2020) analyzed the effect of CBI on bond yield. This study considers the impact of three different asset prices on private consumption and investment.…”

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confidence: 99%

Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

2021

JEM

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The study analyzes the response to financial asset prices and economic activity concerning central bank independence (CBI) shocks in selected developing countries. Financial asset prices were divided into the exchange rate, bond yield, and stock price, while the analysis was contingent on a panel Vector Autoregressive estimation. Furthermore, this study identifies heterogeneity across the countries in its sample through poolability tests. This is achieved through a mean-group estimation to the panel Vector Autoregressive by averaging the PVAR coefficients and impulse response function for all individual countries. Additionally, the sample countries are divided into two sub-groups. The results showed that central bank independence reduces bond yield and increases stock price in the first two quarters. However, it takes a year to cause an appreciation in the exchange rate. Moreover, financial asset prices have an essential role in monetary policy transmission to the extent that a change in CBI affects the exchange rate, bond yield, stock price, thereby influencing private consumption and investment.

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confidence: 99%

Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

2021

JEM

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“…Which factors and at which level each of the factors affects the financial volatility is very vital to know for all types of investors. Different researchers tried to establish the relationship of different factors with volatility (Asgharian et al, 2015;Haider, 2017;Ibrahim & Alagidede, 2017;Issahaku et al, 2017;Kumari & Mahakud, 2015;Mittnik et al, 2015;Mumo, 2017;Ndunda et al, 2016;Nikmanesh, 2016;Okoro, 2017;Papadamou et al, 2017;Pinjaman & Aralas, 2015). Different macro fundamental factors affect volatility such as GDP, money supply, CPI, remittance, exportimport level, exchange rate, domestic credit, foreign reserve, etc.…”

Section: Discussionmentioning

confidence: 99%

“…Oluseyi (2015) Nigeria Unidirectional causality running from inflation and interest rate to volatility. Papadamou, Sidiropoulos, and Spyromitros (2017) A panel of 20 countries This study gives the positive relationship between the independence of the central bank that controls monetary policy and stock market volatility. There is a significant effect of the exchange rate and turnover ratio on volatility.…”

Section: Literature Reviewmentioning

confidence: 99%

Nexus between Remittance, Nonperforming Loan, Money Supply, and Financial Volatility: An Application of ARDL

Qamruzzaman

Bardhan

Nasya

2020

International Journal of Applied Economics, Finance and Account

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The motivation of the study is to investigate the nexus between Remittance, Nonperforming loan, Money supply, and finical volatility for the period from 1976 to 2017. To do so, study apply unit root test for determining variables order of integration, Lag length criteria test to select optimal lag for empirical test and long-run cointegration test i.e. Autoregressive Distributed Lagged (ARDL). Referring to unit root tests, it is apparent that variables established integration in mixed order i.e. few variables are stationary at level and few variable are at first difference. The results of Bound testing ascertain that the presence of long-run association between financial volatility and selected macro fundaments. Referring to the long-term model estimation, it is palpable that magnitudes from macro fundaments to financial volatility established that money supply in the economy is responsible for financial instability on the other hand, remittance and financial development play critical role in maintaining financial stability in the economy.

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“…Second, a more independent central bank is associated with less volatile economic growth and less uncertainty among economic agents (Garriga, 2016). In addition, Papadamou, Sidiropoulos, & Spyromitros (2017) found a positive relationship between central bank independence and financial market volatility, identifying the need for increased transparency in monetary policy to reduce this effect.…”

Section: Central Bank Independence Concept: Significance and Measurement Issuesmentioning

confidence: 95%

Relationship Between Central Bank Independence and Foreign Direct Investment Inflows

Mukhametov

2021

Asian Economic and Financial Review

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The principal objective of this paper is to scrutinize the relationship between central bank independence and foreign direct investment (FDI) inflows. The relevance of this goal is based on the results of recent studies, which indicate that the inflow of direct investment into the economy depends not only on its indicators of economic development, but also on the quality of the institutional environment. The study used a sample of 180 countries covering the period from 1970 to 2012 to model the relationship between the level of central bank independence and inflows of foreign direct investment. The primary method used in the study is linear panel regression with country-specific fixed effects. The results of the econometric modeling demonstrate that an increase in the central bank independence index has a statistically significant positive effect on the inflow of foreign investment. This result can serve as the basis for monetary policy reforms, particularly in developing countries since the expansion of the central bank's independence can become a factor in increasing the investment attractiveness of the economy. Contribution/Originality:This study is one of very few studies which have investigated the effects of central bank independence on the investment attractiveness of an economy. INTRODUCTIONThis article explores the relationship between central bank independence and FDI inflows. FDI is one of the key drivers of economic growth, helping to expand the productive capacity of an economy through the exchange of technology. The inflow of FDI statistically and significantly depends on the macroeconomic stability in the economy (low and stable inflation, a balanced budget and an adequate level of public debt), its trade openness, the size of the domestic market and the rate of economic growth. In addition, the institutional environment also impacts the investment attractiveness of an economy.This study suggests that central bank independence can influence inflows of FDI. Thus, the research question in this article is formulated as follows: What effect does the level of central bank independence exert on FDI inflows into the economy? Central bank independence is associated with lower and more stable inflation and reduces the uncertainty of economic agents, thereby contributing to macroeconomic stability and, as a result, the inflow of FDI.To test this hypothesis, a linear panel regression with fixed effects was employed in the study. The volume of FDI inflow was used as a dependent variable, and the list of independent variables included indicators of the real, fiscal, external and monetary sectors, as well as indicators of the quality of institutions. The sample included 180

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Does central bank independence affect stock market volatility?

Cited by 24 publications

References 59 publications

Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

Nexus between Remittance, Nonperforming Loan, Money Supply, and Financial Volatility: An Application of ARDL

Relationship Between Central Bank Independence and Foreign Direct Investment Inflows

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