Interest Rates and Stock Prices: Evidence from Central and Eastern European Markets
Ovidiu Stoica (),
Anca Nucu and
Delia Diaconaşu ()
Emerging Markets Finance and Trade, 2014, vol. 50, issue S4, 47-62
We provide empirical evidence regarding the responses of Central and Eastern European capital markets to monetary policy via domestic and international short-term interest rate shocks. The analysis is conducted using a four-variable structural vector error correction model identified by means of permanent-transitory restrictions. The results indicate a noticeable effect of the international interest rate on stock market indexes in the cases of the Czech Republic, Hungary, Poland, and Romania. Since no monetary policy autonomy exists in Bulgaria, Latvia, and Lithuania, we find support only for the inverse relationship between foreign interest rate and stock index prices.
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:50:y:2014:i:s4:p:47-62
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