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The Influence of Domestic and International Interest Rates on the ISEQ

  • Bredin, Don

    (University College Dublin)

  • Gavin, Caroline

    (Central Bank and Financial Services Authority of Ireland)

  • O'Reilly, Gerard

    (Central Bank and Financial Services Authority of Ireland)

We investigate the influence of international and domestic monetary policy shocks on the Irish stock market. Specifically, we analyse the impact of (un)expected changes in domestic, US, UK and German / euro area policy rates on the ISEQ between 1988 to 2002 in an event type study. Our decomposition of (un)expected changes in policy rates are based on futures markets and is akin to Kuttner (2001). In the absence of an Irish interest rate futures market, we use a more indirect method by appealing to the expectations theory of the term structure of interest rates. Overall, our results suggest that, with the exception of the US, unanticipated changes in domestic and international interest rates appear to have little significant influence on the Irish stock market.

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Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 9/RT/03.

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Length: 21 pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:cbi:wpaper:9/rt/03
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  2. William Poole & Robert Rasche, 2000. "Perfecting the Market's Knowledge of Monetary Policy," Journal of Financial Services Research, Springer, vol. 18(2), pages 255-298, December.
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  4. Keith Cuthbertson & Don Bredin, 2000. "The Expectations Hypothesis of the Term Structure - The Case of Ireland," The Economic and Social Review, Economic and Social Studies, vol. 31(3), pages 267-281.
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