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Surprises in relation to monetary policy and the capital market

Author

Listed:
  • Walter Gonçalves Junior

    (Doutorando e mestre em Administração pela FGV-EAESP e analista do Banco Central do Brasil.)

  • William Eid Junior

    (Professor titular da FGV-EAESP – Escola de Administração de Empresas de São Paulo da Fundação Getúlio Vargas.)

Abstract

Monetary policy surprises and capital markets: evidences from the Brazilian case. This article evaluates the effects that monetary policy actions exert on Brazilian stock market. By the measures defined to estimate the surprise caused by Comitê de Política Monetária do Banco Central do Brasil (COPOM) decisions, it was verified that to a hypothetic unexpected 1% increase in the target rate is associated an 1.3% average fall of Bovespa Index. Additional tests did not show distinct reactions caused by direction decisions, neither evidences from relevant recent economic events or decision contexts having influences on the surprise responses. JEL Classification: G14; G18; E52.

Suggested Citation

  • Walter Gonçalves Junior & William Eid Junior, 2011. "Surprises in relation to monetary policy and the capital market," Brazilian Journal of Political Economy, Center of Political Economy, vol. 31(3), pages 435-454, July.
    • Handle: RePEc:ekm:repojs:v:31:y:2011:i:3:id:95545
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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