Monetary Policy and the Price Behavior in Emerging Stock Markets

March 1, 1991

Preview Citation

Format: Chicago

Peter Cornelius. Monetary Policy and the Price Behavior in Emerging Stock Markets, (USA: International Monetary Fund, 1991) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines whether the six largest and most active emerging stock markets are informationally efficient with respect to changes in the money supply. To investigate if stock prices fully reflect the information contained in money supply changes, two different econometric techniques are employed. First, direct Granger-causality tests are used, which locus on the short-run relationship between stock prices and money. Second, the long-run behavior of the two variables is studied by means of co-integration tests. The results suggest that at least for two markets profitable trading rules can be developed to earn consistently higher-than-normal rates of return.

Subject: Asset prices, Emerging and frontier financial markets, Financial markets, Monetary base, Money, Price indexes, Prices, Stock markets

Keywords: Asset prices, Emerging and frontier financial markets, Informational efficiency, Market stock price, Monetary base, Money supply, Null hypothesis, Price behavior, Price indexes, Stock markets, Stock price index price, Stock price indexes, Time series, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1991/027
Stock No:

WPIEA0271991
ISBN:

9781451844429
ISSN:

1018-5941

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