Change is Inevitable, Progress is Optional: Impact of FED Tapering Announcements on North African Equity Markets

Giscard Assoumou-Ella, Cécile Bastidon () and Bastien Bonijoly
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Giscard Assoumou-Ella: LEAD - Laboratoire d'Économie Appliquée au Développement - UTLN - Université de Toulon, Université Omar Bongo [Libreville, Gabon]
Bastien Bonijoly: LEAD - Laboratoire d'Économie Appliquée au Développement - UTLN - Université de Toulon

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Abstract: We propose one of the first empirical evaluations of the transmission of the 2013-2015 Federal reserve Tapering announcements associated to assets purchases, to the stock markets of the three north African countries with the most advanced financial development: Egypt, Morocco, and Tunisia. We use two alternative announcement effects dummy variables: one constructed from econometric tests of individual announcements, the other constructed from the media coverage study. In spite of a relatively low level of financial integration, the results of panel data tests show a significant negative impact of announcements, generally associated with the Federal Open Market Committee (FOMC) meetings rather than minutes. This result is in line with the literature on the domestic and international announcement effects of the information released by the FOMC, in the absence of discordance of tone between the meeting statement and the minutes. From the perspective of policy recommendations, the study of the interaction of Tapering announcements with domestic fundamentals shows interesting results. Fundamentals with favorable direct effects on equity markets dynamics could indirectly increase their vulnerability to announcement effects. Inflation, domestic investment and commercial openness show significant interaction effects in the opposite sense of their direct effects, some of which are superior to the direct effects.

Keywords: North Africa; financial development; financial integration; monetary policy transmission; event study; media coverage. (search for similar items in EconPapers)
Date: 2022
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Published in International Economic Journal, 2022, ⟨10.1080/10168737.2022.2052741⟩

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Journal Article: Change is Inevitable, Progress is Optional: Impact of FED Tapering Announcements on North African Equity Markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03691794

DOI: 10.1080/10168737.2022.2052741

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