Stock prices and monetary policy : evidence from Malaysia case
Studies to determine the relationship between stock prices and monetary policy have long been pursued, however as Tobin (1969), Blanchard (1981) and Shah (1984) mentioned, there are still no any empirical study illustrated the best on how the interaction between the monetary policy and stock mark...
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| Main Author: | |
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| Format: | Final Year Project Report |
| Language: | English |
| Published: |
Universiti Malaysia Sarawak, (UNIMAS)
2011
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| Online Access: | http://ir.unimas.my/id/eprint/6436/11/Chin%20Nyuk%20Fui%20ft.pdf http://ir.unimas.my/id/eprint/6436/ |
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| Summary: | Studies to determine the relationship between stock prices and monetary policy have long
been pursued, however as Tobin (1969), Blanchard (1981) and Shah (1984) mentioned, there
are still no any empirical study illustrated the best on how the interaction between the
monetary policy and stock market as well as little effort has been place in identify the
relation of these variables for emerging market especially Malaysia compare to the advanced
market. This study explores empirically the integration between Malaysian stock prices and
monetary policy in post-crisis as well as linkage with other macroeconomic variables. The
study uses the Autoregressive Distributed Lag Model (ARDL), Variance Decomposition
(VDCs) and Impulse Response Function (IRFs). The study finds that the stock prices and
monetary policy has a bidirectional relation in short-run and long-run as consistent with
Bjornland and Leitemo (2008). Moreover, the macroeconomics variables display a
cointegration with stock prices and monetary policy. Astonishingly, Malaysian stock prices
also have significant interaction with the federal fund rate. To the certain extent the market is
informational inefficient, these findings make obvious evidence that are contradictory with
Efficient Market Hypothesis (EMH). |
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