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Monetary policy effectiveness and stock market cycles in ASEAN-5


Zare, Roohollah and Mohamed, Azali and Habibullah, Muzafar Shah and Wan Ngah, Wan Azman Saini (2014) Monetary policy effectiveness and stock market cycles in ASEAN-5. Applied Economics, 46 (20). pp. 2362-2374. ISSN 0003-6846; ESSN: 1466-4283


This article examines the asymmetric effects of monetary policy on real output in bull and bear phases of stock market in five ASEAN economies (Malaysia, Singapore, Indonesia, the Philippines and Thailand) using the recently developed pooled mean group (PMG) technique. Stock market cycles are identified by employing Markov switching models and the rule-based nonparametric approach. Estimating the models using monthly data from 1991:1 to 2011:12, the results show that monetary policy (measured by short-term interest rate) has a negative and statistically significant long-run effect on real output in bull and bear market periods while the effects are stronger in bear periods than bulls. In the short run, there is no statistically significant relationship between monetary policy and real output. These results are consistent with finance constraints (capital market imperfection) models that predict that monetary policy is more effective during bear periods than bulls.

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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
DOI Number: https://doi.org/10.1080/00036846.2014.899673
Publisher: Routledge
Keywords: Monetary policy effectiveness; Stock bull and bear; Pooled mean group; Markov switching
Depositing User: Nurul Ainie Mokhtar
Date Deposited: 16 Dec 2015 03:25
Last Modified: 06 Oct 2016 01:58
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1080/00036846.2014.899673
URI: http://psasir.upm.edu.my/id/eprint/34592
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