Interdependence Between Monetary Policy And Asset Prices In Asean-5 Countries

Solikin Juhro, Bernard N. Iyke and Paresh K. Narayan
Additional contact information
Bernard N. Iyke: APAEA
Paresh K. Narayan: APAEA

No WP/01/2020, Working Papers from Bank Indonesia

Abstract: In this paper, we investigate the interdependence between monetary policy and asset prices in ASEAN-5 countries. Within country-specific models and proxying asset prices by the composite stock market indices of these countries, we find strong interdependence between monetary policy and asset prices. We show that real stock prices decline as interest rates increase due to a contractionary monetary policy shock. Interest rates rise in response to an increase in real stock prices induced by a stock price shock, although it does so after a couple of months after the shock. We find the interdependence of monetary policy and asset prices to hold up within panel models. The delay in interest rate response to stock price shocks originates from three of the ASEAN-5 countries, namely Indonesia, the Philippines, and Thailand.

Keywords: Monetary Policy; Asset Prices; ASEAN-5 Countries (search for similar items in EconPapers)
JEL-codes: E52 E58 E61 G12 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-isf, nep-mac, nep-mon and nep-sea
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http://publication-bi.org/repec/idn/wpaper/WP012020.pdf First version, 2020 (application/pdf)

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Journal Article: Interdependence between monetary policy and asset prices in ASEAN-5 countries (2021)
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