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Does central bank transparency affect stock market volatility?

Stephanos Papadamou (), Moise Sidiropoulos and Eleftherios Spyromitros ()

Journal of International Financial Markets, Institutions and Money, 2014, vol. 31, issue C, 362-377

Abstract: This paper addresses the issue of impacts of central banks’ transparency on stock market volatility. Using a simple theoretical macroeconomic model, we analytically find a negative link between stock prices volatility and central bank transparency. By applying panel data analysis on a set of 40 countries from 1998 to 2005, sufficient evidence for this negative relationship is provided, using three different measures of stock market volatility. Therefore, moving towards monetary policy transparency is recommended as stock market volatility can be reduced considerably, implying significant benefits for financial stability.

Keywords: Central bank transparency; Stock market volatility; Panel data (search for similar items in EconPapers)
JEL-codes: E52 E58 G1 (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:eee:intfin:v:31:y:2014:i:c:p:362-377