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Asymmetric effects of unanticipated monetary shocks on stock prices: Emerging market evidence

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  • Thanh, Su Dinh
  • Canh, Nguyen Phuc
  • Maiti, Moinak

Abstract

This study investigates the asymmetric effects of unanticipated monetary shocks on stock prices in India over the period 1994M4–2018M11. We find that the evolution of stock prices is state-dependent across different monetary policy processes. Unanticipated monetary shocks appear to have significantly asymmetrically lagged effects on stock prices, namely: (i) the positive effect of negative unanticipated shocks in bull markets; and (ii) the negative effect of positive unanticipated shocks in bear markets. Our findings imply that monetary policy-markers should attend to these situations for the future of money-supply policies to diminish the degree of uncertainty about the money supply in adjusting stock prices.

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  • Thanh, Su Dinh & Canh, Nguyen Phuc & Maiti, Moinak, 2020. "Asymmetric effects of unanticipated monetary shocks on stock prices: Emerging market evidence," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 40-55.
    • Handle: RePEc:eee:ecanpo:v:65:y:2020:i:c:p:40-55
    DOI: 10.1016/j.eap.2019.11.005
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    Cited by:

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    2. Li, Xiao-Lin & Yan, Jing & Wei, Xiaohui, 2021. "Dynamic connectedness among monetary policy cycle, financial cycle and business cycle in China," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 640-652.
    3. Yashraj Varma & Renuka Venkataramani & Parthajit Kayal & Moinak Maiti, 2021. "Short-Term Impact of COVID-19 on Indian Stock Market," JRFM, MDPI, vol. 14(11), pages 1-15, November.

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    More about this item

    Keywords

    Asymmetric effects; Unanticipated monetary shocks; Stock prices; Markov switching; India;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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