Does central bank transparency affect stock market volatility?

Stephanos Papadamou, Moïse Sidiropoulos () and Eleftherios Spyromitros
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Moïse Sidiropoulos: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique, Aristotle University of Thessaloniki

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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)
Date: 2014-07
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Citations: View citations in EconPapers (21)

Published in Journal of International Financial Markets, Institutions and Money, 2014, 31, pp.362-377. ⟨10.1016/j.intfin.2014.05.002⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03692261

DOI: 10.1016/j.intfin.2014.05.002

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