Interest rate dynamic effect on stock returns and central bank transparency: Evidence from emerging markets

2017 ◽  
Vol 39 ◽  
pp. 951-962 ◽  
Author(s):  
Stephanos Papadamou ◽  
Moïse Sidiropoulos ◽  
Eleftherios Spyromitros
Keyword(s):  
Interest Rate ◽  
Emerging Markets ◽  
Central Bank ◽  
Stock Returns ◽  
Dynamic Effect ◽  
Central Bank Transparency ◽  
Rate Dynamic

Central bank transparency, inflation targeting and monetary policy: a panel data approach

2018 ◽  
Vol 45 (6) ◽  
pp. 1159-1174 ◽  
Author(s):  
Gabriel Caldas Montes ◽  
Cristiane Gea
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Panel Data ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Content Type ◽  
Central Bank Transparency ◽  
Policy Interest

Purpose The evidence concerning the effects of the inflation targeting (IT) regime as well as greater central bank transparency on monetary policy interest rates is not conclusive, and the following questions remain open. What is the effect of adopting IT on both the level and volatility of monetary policy interest rate? Does central bank transparency affect the level of the monetary policy interest rate and its volatility? Are these effects greater in developing countries? The purpose of this paper is to contribute to the literature by answering these questions. Hence, the paper analyzes the effects of IT and central bank transparency on monetary policy. Design/methodology/approach The analysis uses a sample of 48 countries (31 developing) comprising the period between 1998 and 2014. Based on panel data methodology, estimates are made for the full sample, and then for the sample of developing countries. Findings Countries that adopt the IT regime tend to have lower levels of monetary policy interest rates, as well as lower interest rate volatility. The effect of adopting IT on both the level and volatility of the basic interest rate is smaller in developing countries. Besides, countries with more transparent central banks have lower levels of monetary policy interest rates, as well as lower interest rate volatility. In turn, the effect of central bank transparency on both the level and volatility of the basic interest rate is greater in developing countries. Practical implications The study brings important practical implications regarding the influence of both the IT regime and central bank transparency on monetary policy. Originality/value Studies have sought to analyze whether IT and central bank transparency are effective to control inflation. However, few studies analyze the influence of IT and central bank transparency on interest rates. This study differs from the few existing studies since: the analysis is done not only for the effect of transparency on the level of the monetary policy interest rate, but also on its volatility; the central bank transparency index that is used has never been utilized in this sort of analysis; and the study uses panel data methodology, and compares the results between different samples.

Central bank transparency and the interest rate channel: Evidence from emerging economies

2015 ◽  
Vol 48 ◽  
pp. 167-174 ◽  
Author(s):  
Stephanos Papadamou ◽  
Moïse Sidiropoulos ◽  
Eleftherios Spyromitros
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Emerging Economies ◽  
Central Bank Transparency ◽  
The Interest Rate ◽  
Interest Rate Channel

scholarly journals The Sensitivity of Central Bank Interest Rate on Commercial Banks’ Stock Market Returns in Kenya

2021 ◽  
Vol 7 (5) ◽  
pp. p72
Author(s):  
Micah Odhiambo Nyamita ◽  
Martine Ogola Dima
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Stock Returns ◽  
Commercial Banks ◽  
Secondary Data ◽  
Market Returns ◽  
Cross Sectional ◽  
Stock Market Returns ◽  
Panel Data Regression

Commercial banks occupy a significant position in the transmission of monetary policy through the financial market. Furthermore, commercial banks have assets and liabilities which are interest rate sensitive, and their stock returns are believed to be particularly responsive to changes in the central bank base lending rates. Therefore, this study investigated the sensitivity of central bank interest rate changes on stock returns of listed commercial banks in Kenya for nine year period, from 2006 to 2014. The study used a hybrid of cross sectional and longitudinal quantitative surveys method, applying GMM panel data regression model on the secondary data from the 11 listed commercial banks in Kenya. The study found out that there is a significant strong positive sensitivity of average annual changes in central bank interest rates (CBR) on the stock returns of the listed commercial banks in Kenya, from 2006 to 2014, measured using CAPM. Hence, listed commercial banks’ managers in Kenya should monitor, keenly, the changes in the central bank interest rates and make investor related decisions accordingly.

scholarly journals Predictive Power of Output Growth, Inflation, and Interest Rate on Stock Return and Volatility: A Comparison

2010 ◽  
Author(s):  
Wai Ching Poon ◽  
Gee Kok Tong
Keyword(s):  
Interest Rate ◽  
Emerging Markets ◽  
Stock Returns ◽  
Stock Return ◽  
Predictive Power ◽  
Output Growth ◽  
Stock Market Volatility ◽  
Monthly Data ◽  
Stock Return Volatility ◽  
Economic Volatility

Using monthly data from seven mature and emerging markets and a battery of GARCH and EGARCH models, the study of Davis and Kutan (2003) on inflation and output on stock returns and volatility is extended by including interest rate to compare the effect between three mature markets (US, Japan, and Singapore) and four emerging markets who experienced a crisis before (Malaysia, India, Korea, and Philippines). It is found that economic volatility, as measured by movement in inflation, output growth, and interest rate, have a weak predictor power for stock market volatility and returns. In line with the evidence reported in Davis and Kutan (2003), the findings suggest that there is no support for the Fisher effect in stock returns among the seven mature and emerging markets.   Keywords: Predictive power; output; inflation; interest rate; stock return volatility.  

Interest Rate Signals and Central Bank Transparency [with Comments]

2007 ◽  
Vol 2007 (1) ◽  
pp. 9-62
Author(s):  
Pierre Gosselin ◽  
Aileen Lotz ◽  
Charles Wyplosz ◽  
Charles Bean ◽  
Michael Woodford
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Central Bank Transparency

scholarly journals Transparência do Banco Central e Mercado Financeiro: evidências para o caso brasileiro

2011 ◽  
Vol 9 (1) ◽  
pp. 51
Author(s):  
Helder Ferreira De Mendonça ◽  
José Simão Filho
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Market Efficiency ◽  
Empirical Analysis ◽  
Financial Market ◽  
Country Risk ◽  
Review Of The Literature ◽  
The Future ◽  
Central Bank Transparency ◽  
Different Dimensions

The main objective of this paper is an empirical analysis concerning the effects caused by Central Bank of Brazil transparency on the Brazilian financial market. Furthermore, a brief review of the literature regarding central bank transparency is presented. The effects of the different dimensions of the monetary authority’s transparency on yield interest are examined. Moreover, the consequences regarding changes in the country risk are considered in this study. The findings denote that the Central Bank of Brazil transparency works as a guide for the future interest rate market and that the different dimensions of transparency contribute to a better market efficiency.

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