scholarly journals The Impact of Monetary Policy on Financial Market in South Africa: A VAR Analysis

2014 ◽  
Vol 6 (8) ◽  
pp. 636-646 ◽  
Author(s):  
Flavien Fokou Noumbissie
Keyword(s):  
South Africa ◽  
Monetary Policy ◽  
Stock Market ◽  
Money Supply ◽  
Discount Rate ◽  
Financial Market ◽  
Negative Impact ◽  
Consumer Price Index ◽  
Wealth Creation ◽  
The Impact

Like in many other countries, the South African financial market facilitates the process of raising capital by channelling funds to more productive economic activity, thereby building the nation's economy while enhancing job opportunities and wealth creation. The aim of this paper is to assess the impact of monetary policy on financial market in South Africa. It is important to constantly look into this interaction since policy decisions have a direct influence on financial market. A negative response from the market side may jeopardise economic stability. The study uses the vector autoregressive (VAR) model to evaluate the impact of monetary policy on financial market in South Africa. The model consists of five policy instruments as variables; namely: money supply (M3), real exchange rate(ER), discount Rate (R), consumer price index (CPI), gross domestic product (GDP) and the two market related variables: Stock market turnover (S) and Bond market turnover (B). Data is obtained from SARB and OECD databases for a period of 53 quarters from 2000:Q1 to 2013:Q1. By the use of impulse response function (IRF), the study found that given current economic situation in South Africa, stock market turnover reacts positively to money supply; discount rate; real exchange and GDP shocks. On the other hand stock market turnover reacts negatively to CPI economic shocks. To correct CPI negative impact on markets, we suggest that the policymakers could envisage a contractionary monetary policy translated by a proportional cut in money supply through the sales of government securities.

scholarly journals Effect of Money Supply on the Stock Market

2017 ◽  
Vol 65 (2) ◽  
pp. 465-472 ◽  
Author(s):  
Vladimír Pícha
Keyword(s):  
Monetary Policy ◽  
Stock Market ◽  
Money Supply ◽  
Policy Framework ◽  
Vector Error Correction ◽  
Flow Of Funds ◽  
Portfolio Balance ◽  
Vector Error ◽  
Long Run ◽  
The Impact

This paper observes effect of money supply on the stock market through the portfolio balance channel as a transmission mechanism of monetary policy. National flow of funds accounts, specifically assets from US households’ portfolios, represent a key data source. Johansen’s cointegration methodology is employed in the empirical part of the paper to analyze both short term and long term relationships among researched variables. Estimates of vector error correction model help to reliably quantify intensity of the effect. Results show money supply excercises influence on valuation of S&P 500 index with 6 months lag. The impact is also distinguishable in the long run, whereas all observed asset classes can positively influence price of S&P 500. Findings are then contextualized in the concluding part of the paper using a monetary policy framework.

scholarly journals Impacts of Monetary Policy on Inflation in Bangladesh

2012 ◽  
Vol 1 (2) ◽  
pp. 103-119
Author(s):  
Mohammad Nayeem Abdullah ◽  
Kamruddin Parvez ◽  
Rahat Bari Tooheen
Keyword(s):  
Monetary Policy ◽  
Money Supply ◽  
Consumer Price Index ◽  
Developed Countries ◽  
Open Market ◽  
Major Transitions ◽  
Classification Code ◽  
Inflation Rates ◽  
The Developed Countries ◽  
The Impact

The objective of this paper is to analyze and discuss the impacts of monetary policy on Bangladesh inflation, identify the major drawbacks of the policies in minimizing the inflation rate and suggest policy recommendations on some key issues of Bangladesh inflation. To estimate the effects of the monetary policy in Bangladesh, at first the impact of different monetary policy tools used by the “Central Banks” of the developed countries have been reviewed. Next, the impact of the monetary policy of Bangladesh Bank and government have been analyzed for which the data on money supply, growth of the GDP, changes in the price level, and changes in the unemployment rate have been quantitatively analyzed. We mainly used Consumer Price Index to determine the level on inflation in Bangladesh. Moreover, our study focuses on data collected from the 1950-2012, mainly focusing our study from the period of 2000-2012 as major transitions have been observed in the economy during the 12 years. We have further analyzed whether there is any correlation between (i) inflation rates and money supply, and (ii) inflation rates and growth of GDP. On the basis of the outcome of the qualitative and quantitative analysis, in the end findings and conclusion have been drawn. We have found the correlation, the impacts of monetary policy and inflation, their drawbacks and possible solutions such as independence of the monetary policy from the fiscal policy and enhancing the transparency, communication and signaling effect of policy moves, keeping the broad money in line with the estimated real GDP growth, borrowing from non-bank sources, and control money supply through various open market operations. Due to lack of access to sufficient data, some of our work is based on hypothesis and models. So some data vary according to the model being used. Lastly, even though, many works have been done from the perspective of developed and other developing countries, much work has not been carried out to establish the relationship between monetary policy and inflation in Bangladesh. GEL Classification Code: E31; E42; E50

scholarly journals Monetary Policy and Liquidity of Vietnam’s Stock Market

2016 ◽  
Vol 23 (02) ◽  
pp. 02-21
Author(s):  
Ly Tran Thi Hai
Keyword(s):  
Time Series ◽  
Monetary Policy ◽  
Stock Market ◽  
Money Supply ◽  
Industrial Production ◽  
Market Liquidity ◽  
Var Model ◽  
Market Returns ◽  
Liquidity Measures ◽  
The Impact

This study investigates the impact of monetary policy on liquidity of Vietnam’s stock market from September 2007 to November 2014. Time series of liquidity are determined by monthly liquidity data for 643 enterprises in the surveyed period. Two variables of the monetary policy, including growth in money supply and interbank rate, are employed in VAR model along with four different measures of market liquidity. The results show that unexpected variance in the two monetary policy variables has no significant impact on the market liquidity, which, in turn, may be improved by the positive shocks of market returns, inflation, and growth in industrial production. Market variance does produce certain effects, but discrepancies occur in the signs of various liquidity measures.

scholarly journals Impact of Monetary Policy on Economic Growth: Empirical Evidence in Vietnam

2019 ◽  
Vol 5 (10) ◽  
Author(s):  
Tang My Sang
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rates ◽  
Empirical Evidence ◽  
Money Supply ◽  
Negative Impact ◽  
Positive Impact ◽  
Secondary Data ◽  
The Impact

Through the secondary data collected from 2009 to 2018, the research used Var method to test the impact of monetary policy on economic growth in Vietnam. The results show that there is a relationship between the variables of monetary policy and economic growth, in which the money supply has a positive impact at a high significant level, interest rates have a negative impact on Vietnam economic growth. From the results obtained, the research proposed solutions for operating monetary policy.

scholarly journals The Effects of Money Supply and Interest Rates on Stock Prices, Evidence from Two Behavioral Experiments

2021 ◽  
Vol 8 (2) ◽  
pp. 33
Author(s):  
Christian A. Conrad
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Stock Market ◽  
Interest Rates ◽  
Money Supply ◽  
Stock Prices ◽  
Positive Impact ◽  
Real Economy ◽  
Behavioral Experiments ◽  
The Impact

What is the impact of interest rate and monetary policy on the stock market? Some studies find a positive impact of expansive monetary policy on stock prices others prove the opposite. This paper examines the effects of monetary expansion and interest rate changes on investment behavior on the stock market by illustrating two behavioral experiments with students. In our experiments the increase of money supply and the decrease of interest rates had a direct positive impact on share prices. These findings support the hypothesis that extreme expansive monetary policy with low, zero or negative interest rates encourage financial bubbles on the stock market. To avoid a crash the exit from such a policy must be slow. As happened in 1929, crashes can damage the financial system and the real economy. Central banks must take this into account in their monetary policy.

The Impact of Air Pollution on the Stock Market in South Korea

2021 ◽  
Author(s):  
◽  
Seongcheol Paeng
Keyword(s):  
Air Pollution ◽  
Stock Market ◽  
South Korea ◽  
Financial Market ◽  
Behavioral Finance ◽  
Negative Impact ◽  
Impulse Response Function ◽  
Weather Factors ◽  
Momentum Strategy ◽  
The Impact

Recently, behavioral finance researchers have produced many articles about moods effect on financial market. Weather factors and sports sentiments have a significant impact on moods and then the moods affect financial market. Air pollution also has an effect on financial market. This paper's hypothesis is that air pollution has a meaningful negative impact on the stock market in South Korea. This paper uses the Granger Causality for checking the significances and the Vector Auto-Regression model and the Impulse Response Function for investigating its impact according to time. Furthermore, this paper uses the 2SLS method for resolving endogeneity problems and checking robustness. If the level of air pollution increases 100 ??/?3, then the stock return reduces 0.42 after one day, and then recovers. The effect is significant at the 1% level and similar with the 2SLS method. Finally, this paper introduces air pollution momentum strategy that maximizes the cumulative return and measures the key variable's performance.

The Impact Of Monetary Policy Using Islamic Or Non-islamic Money Supply On Fdi In Jordan (1980-2018)

2021 ◽  
pp. 73-103
Author(s):  
Adham Taher Mohmmad Alessa ◽  
Hartini Mohammad
Keyword(s):  
Monetary Policy ◽  
Foreign Direct Investment ◽  
Money Supply ◽  
Direct Investment ◽  
Negative Impact ◽  
Positive Impact ◽  
Statistical Tests ◽  
Domestic Investment ◽  
Study Results ◽  
The Impact

This study aimed to investigate the impact of monetary policy using Islamic or non-Islamic money supply on FDI in Jordan. Using time series analysis of selected variables during the period 1980 until 2018 using the ARDL model. The objective achieved the appropriate statistical tests such as data stability and co-integration tests have been used. The variables analyzed include the money supply (M2), the Islamic money supply (IMS), the export (EXP), Government Expenditure (GOV), inflation rate (INR), The gross domestic product (GDP) as independent variables. The dependant variable is the foreign direct investment (FDI). This study results in a long-term and short-term statistically significant correlation between the money supply (M2), the Islamic money supply (IMS) and FDI. The Islamic money supply (IMS) has a positive impact and the money supply (M2) has a negative impact on the FDI. The study recommended; the Jordanian government must implement a targeted Islamic monetary policy to attract foreign direct investment in the Jordanian economy. Provide an appropriate environment for investment and to remove the obstacles to investment in general, in order to attract the capital of Jordanians working abroad for domestic investment, as well as for foreign investments.

scholarly journals The impact of monetary policy on the economic growth of a small and open economy: The case of South Africa

2014 ◽  
Vol 8 (3) ◽  
pp. 348-362 ◽  
Author(s):  
V Khabo ◽  
C Harmse
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Monetary Policy ◽  
Money Supply ◽  
Open Economy ◽  
Opposite Effect ◽  
Test Statistic ◽  
Monetary Authorities ◽  
Repo Rate ◽  
The Impact

This study evaluates the impact of monetary policy on the economic growth of a small and open economy like that of South Africa. Structuralists contend that changes in money supply (M3) and inflation (CPI) are not significantly related to changes in economic growth (GDP), while orthodox economists argue that they are. Stucturalists also hold that monetary authorities cannot control M3, whereas orthodox economists believe they can. To structuralists, when monetary authorities pursue an expansionary policy, the opposite effect is achieved. Orthodox economists counter this argument. The ADT test statistic against the McKinnon critical values was used and it was found (i) that money supply changes and inflation are significantly related to changes in economic growth, and (ii) whereas monetary authorities can control M3 through the repo rate,  they cannot keep it within set targets.

scholarly journals Impacts of Monetary Policy and Information Shock on Stock Market: Case Study in Vietnam

2016 ◽  
Vol 8 (7) ◽  
pp. 132 ◽  
Author(s):  
Trung Thanh Nguyen ◽  
Thi Linh Do ◽  
Van Duy Nguyen
Keyword(s):  
Monetary Policy ◽  
Stock Market ◽  
Stock Price ◽  
Negative Impact ◽  
Stock Index ◽  
Macroeconomic Factors ◽  
Good Market ◽  
Time Serie ◽  
The Impact

<p>Evaluation of the impact of monetary policy on Vietnam stock market plays an important role for economists as well as stock investors. Stock price index not only gets impacts from the macroeconomic factors such as oil price, gold prices…but also be very sensitive to the changes in monetary policy. For each different markets, stock index are also different from each other. Hence, this artical is conducted to evaluate the impacts of monetary policy on Vietnam Stock Index (VNIDEX) in the period of the time from 2006 to 2015. The author uses GJR - GARCH model and ARDL research with time-serie data by statistical methods and quantitative analysis to evaluate the above impact related to lag and shocks in the market. The result shows that the monetary policy including interests, exchange rate and required reserve ratio has a negative impact on stock price in long term. Besides, both bad or good market shock cause changes of stock price at stable level.</p>

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