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How do Banks’ Stock Returns Respond to Monetary Policy Committee Announcements in Turkey? Evidence from Traditional versus New Monetary Policy Episodes

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  • Guray Kucukkocaoglu
  • Deren Unalmis
  • Ibrahim Unalmis

Abstract

Using a methodology that is robust to endogeneity and omitted variables problems, it is found that the stock returns of all banks that are listed in Borsa Istanbul respond significantly to the monetary policy surprises on Monetary Policy Committee (MPC) meeting days prior to May 2010. It is shown that stock returns of banks for which interest payments constitute an important share in their balance sheets respond more aggressively to the changes in policy rates. In addition, foreign banks and participation banks give relatively less responses to monetary policy surprises. Estimation results differ between traditional and new monetary policy episodes.

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Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1330.

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Date of creation: 2013
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Handle: RePEc:tcb:wpaper:1330

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Keywords: Monetary Policy; Stock Market; Banking System; Emerging Markets; Identification through Heteroscedasticity;

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  1. Roberto Rigobon & Brian P. Sack, 2002. "The Impact of Monetary Policy on Asset Prices," NBER Working Papers 8794, National Bureau of Economic Research, Inc.
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  9. Guimarães, Bernardo & Soares Gonçalves, Carlos Eduardo, 2007. "Monetary Policy, Default Risk and the Exchange Rate," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6501, C.E.P.R. Discussion Papers.
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  11. András Rezessy, 2005. "Estimating the immediate impact of monetary policy shocks on the exchange rate and other asset prices in Hungary," MNB Occasional Papers, Magyar Nemzeti Bank (the central bank of Hungary) 2005/38, Magyar Nemzeti Bank (the central bank of Hungary).
  12. Carlo Rosa, 2011. "The Validity of the Event‐study Approach: Evidence from the Impact of the Fed's Monetary Policy on US and Foreign Asset Prices," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 78(311), pages 429-439, 07.
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