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The impact of monetary policy on financial markets in small open economies: More or less effective during the global financial crisis?

Listed author(s):
  • Pennings, Steven
  • Ramayandi, Arief
  • Tang, Hsiao Chink

This paper estimates the impact of monetary policy on exchange rates and stock prices of eight small open economies: Australia, Canada, the Republic of Korea, New Zealand, the United Kingdom, Indonesia, Malaysia, and Thailand. On average across these countries in the full sample, a one percentage point surprise rise in official interest rates leads to a 1% appreciation of the exchange rate and a 0.5–1% fall in stock prices, with somewhat stronger effects in OECD countries than non-OECD countries (though differences are sometimes not significant). We find little robust evidence of a change in the effect of monetary policy surprises during the recent financial crisis.

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File URL: http://www.sciencedirect.com/science/article/pii/S0164070415000087
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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 44 (2015)
Issue (Month): C ()
Pages: 60-70

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Handle: RePEc:eee:jmacro:v:44:y:2015:i:c:p:60-70
DOI: 10.1016/j.jmacro.2015.01.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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