Interdependence between monetary policy and asset prices in ASEAN-5 countries

Solikin Juhro, Bernard Njindan Iyke and Paresh Kumar Narayan

Journal of International Financial Markets, Institutions and Money, 2021, vol. 75, issue C

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 real stock price shock, although it does so 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 real 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)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Interdependence Between Monetary Policy And Asset Prices In Asean-5 Countries (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:75:y:2021:i:c:s104244312100158x

DOI: 10.1016/j.intfin.2021.101448

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