Do financial markets react to emerging economies’ asset purchase program? Evidence from the COVID-19 pandemic period

K.P. Prabheesh, Rakesh Padhan and Javed Ahmad Bhat

Journal of Asian Economics, 2024, vol. 90, issue C

Abstract: We employ the daily data on bond yield, stock return, and exchange rate to explore their reaction to the large-scale asset purchase program for 8 emerging market economies during the COVID-19 pandemic period. Using event study analysis, we find that: (1) out of 8 emerging economies, 6 economies’ financial markets react to the asset purchase announcements. (2) Most economies witnessed a rise in stock return, and a fall in the yield rate. (3) 2 economies witnessed currency appreciation, while 3 economies experience currency depreciation. Overall, the asset purchase announcements have a mixed effect on the stock, bond, and foreign exchange markets. Hence, these should be included in the central bank’s toolbox as complementary instruments applied to address certain unprecedented economic circumstances.

Keywords: Asset purchase program; Stock return; Yield rate; Exchange rate; Event study analysis (search for similar items in EconPapers)
JEL-codes: E43 E44 E50 E52 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:90:y:2024:i:c:s1049007823000982

DOI: 10.1016/j.asieco.2023.101678

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