Financial Integration, Monetary Policy and Stock Prices: Empirical Evidence for the New EU Member States
AbstractWe provide empirical evidence on the interaction between monetary policy and stock prices in 4 new EU member states of Central and Eastern Europe by estimating a small open economy macroeconometric model (SVAR) identi?ed by means of short-run restrictions. Our modeling choices refl?ect the increasing integration between the NMS and the Euro Area. Our contributions are twofold. We analyze the monetary transmission mechanism through stock prices in the NMS and we determine the extent to which fi?nancial markets in the aforementioned countries are sensitive to euro area monetary policy actions. We conclude that stock prices in the NMS are more sensitive to changes in the Euro Area interest rate than to the domestic one. Only in the Czech Republic and Poland we fi?nd a signi?cant negative effect of contractionary monetary policy on stock prices. Moreover, we fi?nd that the volatility of stock prices in the NMS is mainly due to shocks related to exchange rate and Euro Area monetary policy shocks.
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Bibliographic InfoPaper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2010024.
Length: 39 pages
Date of creation: Oct 2010
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Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-13 (All new papers)
- NEP-CBA-2010-11-13 (Central Banking)
- NEP-EEC-2010-11-13 (European Economics)
- NEP-MON-2010-11-13 (Monetary Economics)
- NEP-TRA-2010-11-13 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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