MONETARY POLICY AND STOCK MARKET MOVEMENTS IN TURKEY

Several studies have suggested that macroeconomic variables affect Stock market returns using Treasury bill rate as a measure of interest rate. The study examines the joint impact of interest rates and Treasury bill rate on stock market returns on Ghana Stock Exchange over the period between January 1995 and December 2011. Using Johansen's Multivariate Cointegration Model and Vector Error Correction Model the study establish that there is cointegration between Interest rate, Treasury bill rate and stock market returns indicating long run relationship. On the basis of the Multiple Regression Analysis (OLS) carried out by Eviews 7 program, the results

The working paper investigates the existence of a relationship between macroeconomic news and performance of the Deutch Hellenic and Italian stock market. OLS methodology is chosen to isolate economic news components of the observed macroeconomic indicators. The estimation results show that macroeconomic news related to interest rates or Government bonds with 10 years of maturity and GDP have a significant impact on the stock market performance. It is also revealed that stock returns shocks respond more to unexpected events not only economical or political, but also events occurred worldwide.

The study provides an empirical evidence of the relationship between macroeconomic variables and bank stock returns in the context of GCC countries using a panel data approach. The data for this study is retrieved from the DataStream World Bank Data archive. The data of 66 banks for the period 2005-2014 was examined using GLS estimation for the analysis. The findings revealed that there is a statistically positive relationship between macroeconomic variables and Islamic bank returns. The positive relationship implies that most banks in the GCC countries engage in numerous off-balance sheet transactions and implement efficient and effective methods of risk management, which reduces their exposure to changes in macroeconomic variables.

Journal of Investment and Management, 2015

This study intends to explore the impact of monetary policy on the performance of stock market from the perspective of a developing country-namely Bangladesh. The issue of monetary policy has been a subject of debate among several financial economists since a long time. Monetary policy is basically that part of the macroeconomics, which aims to achieve a set of objectives that are, conveyed in terms of several macroeconomic variables such as inflation, real output, money supply, exchange rate etc. As a result, any change in the monetary policy will have an effect on these variables. Understanding the sensitivity of stock market with respect to these variables of monetary policy frameworks is very important, particularly to recognize the monetary policy mechanism transmission into the stock market. This paper investigates whether current economic activities or more specifically the monetary policy tools of Bangladesh can explain stock market returns by using a number of econometric models of measuring long-run and short-run relationship between monetary policy tools and stock price.

This paper estimates monetary policy rules for two key emerging market economies: Brazil and China. It analyses whether the monetary authority reacts to changes in economic activity, financial markets, monetary conditions, the foreign exchange market and the commodity price. We assess the importance of nonlinearity using a smooth transition regression (STR) model. Using quarterly data over the time period 1990:1-2008:4, we find that considerations about the output gap and the real effective exchange rate (in the case of Brazil), and the inflation rate (for China) explain the nonlinear adjustment of the central bank rate. Moreover, the results suggest that central banks pursue a target range for the threshold variable rather than a specific point target. In the case of China, a McCallum rule shows that the GDP growth, the interest rate and the commodity price drive the response of the growth rate of the relevant monetary aggregate.

Economic Inquiry, 2004

Does the Federal Reserve System consider the level of the stock market when setting monetary policy? This paper examines empirically if monetary policy, since the October 19, 1987 stock market crash, has been influenced by the stock market. We conclude that the Fed considers the stock market only to the extent that it influences inflation and the output gap. As a consequence the Federal Reserve policy accommodated the high valuations in the 1990s of the stock market as measured by the S&P500 P/E ratio.

Abstract: The study examines the joint impact of interest rate and Treasury bill rate on stock market returns on Ghana Stock Exchange over the period between January 1995 and December 2011. Using Johansen’s Multivariate Cointegration Model and Vector Error Correction Model the study establish that there is cointegration between Interest rate, Treasury bill rate and stock market returns indicating long run relationship. On the basis of the Multiple Regression Analysis (OLS) carried out by Eviews 7 program, the results shows that Treasury bill rate and interest rate both have a negative relationship with stock market returns but are not significant. These results show that interest rate and Treasury bill rate have both negative relationship but weak predictive power on stock market returns independently. The study conclude that interest rate and Treasury bill rate jointly impact on stock market returns in the long run.

Participants in the …, 2009

The paper investigates the effects of the exchange rates and interest rates on stock market performance by using monthly time series data for the economy of Bangladesh, over the period of 1997 to 2010. This study uses econometric techniques of measuring the long and short term relationship between variables using the concept of Cointegration and Error Correction Model and analysis of Variance Decomposition. Causal relationships have been investigated using Granger causality test. By employing Cointegration technique it is observed that in the long run, a one percent increase in exchange rate and in interest rate contributes1.04% increase and 1.71 % decrease in market index respectively. The estimated error correction coefficient indicates that 7.8 percent deviation of stock returns are corrected in the short run. Finally, Granger causality analysis suggests the existence of a unidirectional causality from market index to exchange rate and from interest rate to market index.

2012

paper applies the IS-MP model to study potential impacts of selected macroeconomic variables and external shocks including crude oil prices on real GDP for Indonesia. The results show that a higher real stock price, real appreciation of the rupiah, a lower inflation rate, a higher real crude oil price, and a lower real federal funds rate are expected to increase Indonesia's real GDP. More deficit spending as a percent of GDP would not cause real output to rise. Hence, Indonesia would not suffer declining output because of higher oil prices. Due to the insignificant coefficient of the government deficit as a percent of GDP, fiscal prudence needs to be pursued.

International Journal of Economics and Finance, 2018

The aim of this study is comparing the performance of common stock & treasury bills, according to the central bank of Egypt and their monetary policy during the time period between “1994-2017”, using descriptive & inferential statistical methods. The Study concluded that there is a strong positive relationship between inflation rate & returns of Egyptian treasury bills, as the same relation as with floating Egyptian pound.

The debate on interest rates is not new for Turkey, but it expectedly intensifies during the economic slowdown periods. In order to determine the real reasons behind the decline in economic activity and the factors posing an obstacle to reaching the aims of economic policy, we need to reveal the relationships between interest rate, investment, inflation rate and growth rate in Turkey. This paper attempts to clarify if there is any causality and correlation between these indicators by analysing data belonging to 2002-2015 and obtained from the Electronic Data Delivery System (EDDS) of Central Bank of the Republic of Turkey (CBRT) and Turkish Statistical Institute (TurkStat). We applied Augmented Dickey-Fuller test, Granger causality tests and Pearson and Kendall Tau's correlation tests. Consequently, interest rates in Turkey do not play any direct role in determining investments and growth (and the relationship between interest rate and growth is even weaker, there is nearly no relation at all between them). In that case, economic authorities should focus on other factors in order to accelerate growth rates.

This study examined the effects of monetary policy innovations on stabilization of commodity prices in Nigeria. The design is basically exploratory in that the study leaves room for further study in the area. The methodology is empirical econometric analysis approach. Variables used for analysis were consumer price index (CPI), broad money aggregates (BMA) and monetary policy rate (MPR). These variables were considered appropriate indicators of monetary policy innovations and commodity price responses. Main tool of analysis was a multiple regression model specified on perceived functional link between the indicators of Central Bank of Nigeria's monetary policy innovations and commodity prices indicator. CPI as a proxy for commodity prices was treated as response variable while BMA and MPR were treated as causal variables. Data on the variables were used to estimate parameters of the model via the OLS techniques. Estimates of model parameters were evaluated based on relevant statistics from the regression output. The result showed that positive relationship existed between the respective indicators of monetary policy innovations and indicator of commodity prices. Also, monetary policy rate had more immediate effect than broad money on consumer price index, and that commodity prices responded more to monetary policy rates than to broad money aggregates. The result also indicated that, although both broad money and monetary policy rate exerted positive effect on commodity prices, only broad money exerted significant effect at 0.05 level of significance. However, overall effect of both on commodity prices was statistically significant. Consequently, the study recommended, among other things, that the Central Bank of Nigeria should always determine optimal mix of both policy variables to ensure stabilization of consumer goods and other commodity prices, and engender confidence in the Bank's monetary policy.

Global Business and Management Research an International Journal, 2013

The paper investigates the effects of interest rates on stock market performance by using monthly time series data for the economy of Bangladesh over the period of 1991 to 2012. A wide range of econometric techniques have been employed to analyze the relationship between the interest rate and stock market return. The study reveals a stable and significant long run relationship between the variables. By employing Cointegration technique it is observed that in the long run, a one percent increase in interest rate causes 13.20 % decrease in market index. The estimated error correction coefficient indicates that 0.12 percent deviation of stock returns are corrected in the short run. Impulse response function of the study also affirms the negative relationship between the variables. The result of Variance decompositions suggests that about 99.57 % of the variation in stock market returns is attributable to its own shock which implies that stock market returns are largely independent of the other variables in the system. Finally, Granger causality analysis suggests the existence of a unidirectional causality from interest rate to market index.