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Impact of Monetary Policy on the Volatility of Stock Market in Pakistan

  • Qayyum, Abdul
  • Anwar, Saba

This paper addresses the linkages between the monetary policy and the stock market in Pakistan. The estimation technique employed includes Engle Granger two step procedure and the bivariate EGARCH method. The results indicate that any change in the monetary policy stance have a significant impact on the volatility of the stock market. Thus contributing to the ongoing debate in the monetary policy rule literature regarding the proactive and reactive approach.

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File URL: http://mpra.ub.uni-muenchen.de/31188/2/MPRA_paper_31188.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31188.

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Date of creation: 2011
Date of revision:
Publication status: Published in International Journal of Business and Social Science 11.2(2011): pp. 18-24
Handle: RePEc:pra:mprapa:31188
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  1. Ray C. Fair, 2002. "Events That Shook the Market," The Journal of Business, University of Chicago Press, vol. 75(4), pages 713-732, October.
  2. Ben S. Bernanke & Kenneth N. Kuttner, 2004. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," NBER Working Papers 10402, National Bureau of Economic Research, Inc.
  3. A. Gregoriou & A. Kontonikas & R. MacDonald & A. Montagnoli, 2009. "Monetary policy shocks and stock returns: evidence from the British market," Financial Markets and Portfolio Management, Springer, vol. 23(4), pages 401-410, December.
  4. Patelis, Alex D, 1997. " Stock Return Predictability and the Role of Monetary Policy," Journal of Finance, American Finance Association, vol. 52(5), pages 1951-72, December.
  5. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
  6. Fazal Husain & Abdul Qayyum, 2006. "Stock Market Liberalisations in the South Asian Region," Finance Working Papers 22195, East Asian Bureau of Economic Research.
  7. Christos Ioannidis & Alexandros Kontonikas, 2006. "Monetary Policy and the Stock Market: Some International evidence," Working Papers 2006_12, Business School - Economics, University of Glasgow.
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