Asymmetric effects of unanticipated monetary shocks on stock prices: Emerging market evidence

Thanh Su, Canh Nguyen and Moinak Maiti

Economic Analysis and Policy, 2020, vol. 65, issue C, 40-55

Abstract: This study investigates the asymmetric effects of unanticipated monetary shocks on stock prices in India over the period 1994M4–2018M11. We find that the evolution of stock prices is state-dependent across different monetary policy processes. Unanticipated monetary shocks appear to have significantly asymmetrically lagged effects on stock prices, namely: (i) the positive effect of negative unanticipated shocks in bull markets; and (ii) the negative effect of positive unanticipated shocks in bear markets. Our findings imply that monetary policy-markers should attend to these situations for the future of money-supply policies to diminish the degree of uncertainty about the money supply in adjusting stock prices.

Keywords: Asymmetric effects; Unanticipated monetary shocks; Stock prices; Markov switching; India (search for similar items in EconPapers)
JEL-codes: D53 E30 E52 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:65:y:2020:i:c:p:40-55

DOI: 10.1016/j.eap.2019.11.005

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