The impact of monetary policy on financial markets in small open economies: More or less effective during the global financial crisis?

Steven Pennings, Arief Ramayandi and Hsiao Chink Tang

Journal of Macroeconomics, 2015, vol. 44, issue C, 60-70

Abstract: This paper estimates the impact of monetary policy on exchange rates and stock prices of eight small open economies: Australia, Canada, the Republic of Korea, New Zealand, the United Kingdom, Indonesia, Malaysia, and Thailand. On average across these countries in the full sample, a one percentage point surprise rise in official interest rates leads to a 1% appreciation of the exchange rate and a 0.5–1% fall in stock prices, with somewhat stronger effects in OECD countries than non-OECD countries (though differences are sometimes not significant). We find little robust evidence of a change in the effect of monetary policy surprises during the recent financial crisis.

Keywords: Monetary policy effectiveness; Exchange rates; Stock prices; Crisis; Asian economies (search for similar items in EconPapers)
JEL-codes: E4 E5 G1 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: The Impact of Monetary Policy on Financial Markets in Small Open Economies: More or Less Effective During the Global Financial Crisis? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:44:y:2015:i:c:p:60-70

DOI: 10.1016/j.jmacro.2015.01.001

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