US Monetary Policy and BRICS Stock Market Bubbles

Rangan Gupta, Jacobus Nel () and Joshua Nielsen ()
Additional contact information
Jacobus Nel: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Joshua Nielsen: Boulder Investment Technologies, LLC, 1942 Broadway Suite 314C, Boulder, CO ,80302, USA

No 202243, Working Papers from University of Pretoria, Department of Economics

Abstract: We use the multi-scale Log-Periodic Power Law Singularity (LPPLS) confidence indicator approach to detect both positive and negative bubbles at short-, medium- and long-run for the stock markets of the BRICS countries. We were able to detect major crashes and rallies in the five stock markets over 2nd week of February, 1999 to 2nd week of September, 2020. We also observed similar timing of strong (positive and negative) LPPLS indicator values across the countries, suggesting interconnectedness of the extreme movements in these stock markets. Then, we utilize impulse responses obtained from the local projection method (LPM) framework to capture the effect of US monetary policy shocks on a specific-type of bubble of a particular equity market of the BRICS bloc, by controlling for lagged values of the category of bubble under consideration of all the five countries, due to the synchronicity of bubbles. In general, the effect of US monetary policy shocks on the six bubble indicators for each country is limited, with strong positive impact observed under the medium-term negative bubble indicator of Brazil, China and South Africa. Given the findings, associated policy implications are discussed.

Keywords: Multi-Scale Bubbles; Local Projection Method; US Monetary Policy; BRICS Countries (search for similar items in EconPapers)
JEL-codes: C22 E52 G15 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-09
New Economics Papers: this item is included in nep-cba, nep-fmk and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: US monetary policy and BRICS stock market bubbles (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202243

Access Statistics for this paper

More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().