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Reaction of the Philippine stock market to domestic monetary policy surprises: an event study approach

Raluca Maran

MPRA Paper from University Library of Munich, Germany

Abstract: This paper uses an event study analysis to assess how stock prices in the Philippines have reacted to domestic monetary-policy changes using data at a daily frequency from 2017 to 2022. A major contribution of this paper is the construction of a monetary-policy surprise measure for the Philippines, as the difference between the actual change in the monetary policy rate and the change anticipated by professional forecasters. My results are consistent with the literature, suggesting that unanticipated monetary policy changes exert a significant influence on stock prices in the Philippines. Overall, I find that an unexpected increase of 25 basis points in the monetary policy rate increases stock prices by about 1.09% on average. These results are robust to the inclusion of additional control variables in the baseline regression model, such as the implementation of restrictions to economic activity to curb the spread of the COVID-19 outbreak or revisions to macroeconomic forecasts released concomitantly with the monetary-policy rate announcement.

Keywords: Event study; government policy responses; monetary policy surprise; Philippines; stock market returns. (search for similar items in EconPapers)
JEL-codes: E52 G14 (search for similar items in EconPapers)
Date: 2022-10-03
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mon and nep-sea
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