Search results

1 – 10 of over 33000
Article
Publication date: 12 October 2015

J. Christopher Hughen and Scott Beyer

In the increasingly globalized economy, foreign exchange fluctuations have multiple, conflicting effects on domestic stock prices. The purpose of this paper is to examine…

2086

Abstract

Purpose

In the increasingly globalized economy, foreign exchange fluctuations have multiple, conflicting effects on domestic stock prices. The purpose of this paper is to examine return data to determine the relation between the dollar’s value and stock prices as it relates to monetary policy.

Design/methodology/approach

The authors examine US stock returns over a 40-year period, which is classified according to monetary policy and dollar trend. To better understand the impact of foreign exchange fluctuations, the authors estimate a model of stock returns using the three Fama-French factors and a momentum factor. Then the authors explore the underlying economic fundamentals that drive the sharp difference in annual returns between periods when the dollar is in an uptrend trend with loose monetary policy and periods when the dollar is in a downtrend with tight monetary policy.

Findings

Over the last 40 years, US stock returns were 2.5 times higher when the dollar was trending up vs down. The factor model of returns shows that equity returns are positively associated with periods when the dollar appreciated. Returns were particularly high when the dollar was in an uptrend during accommodative monetary policy. During these periods, stocks in the consumer goods and services industries provided relatively high returns. This occurred with strong economic growth due to consumer spending. Stocks exhibited the lowest returns when the dollar was depreciating and the Federal Reserve was tightening.

Originality/value

The key contribution of the research is that currency trends should be analyzed in the light of monetary policy. During periods of accommodative monetary policy and dollar appreciation, the US stock market provided average returns of 18.7 percent compared to −3.29 percent during a period of restrictive monetary policy and dollar depreciation. This result is driven by stronger economic growth, which is composed of consumer spending that more than offsets the dollar’s impact on net exports.

Details

Managerial Finance, vol. 41 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

Content available
Book part
Publication date: 13 May 2019

Rosaria Rita Canale and Rajmund Mirdala

Abstract

Details

Fiscal and Monetary Policy in the Eurozone: Theoretical Concepts and Empirical Evidence
Type: Book
ISBN: 978-1-78743-793-7

Article
Publication date: 11 August 2022

Alhassan Turay, Mehdi Seraj and Hüseyin Özdeşer

The degree of responsiveness of fiscal and monetary policy mechanisms that promote growth and development in Sierra Leone is the subject of this article.

Abstract

Purpose

The degree of responsiveness of fiscal and monetary policy mechanisms that promote growth and development in Sierra Leone is the subject of this article.

Design/methodology/approach

This article uses both the Auto Regressive Distributed Lag (ARDL) model presented by Hashem and Yongcheol (1998) and the Non-Linear Auto Regressive Distributed Lag (NARDL) model by Shin et al. (2014) to analyze annual time-series data in evaluating the asymmetric effect of real gross domestic product (RGDP), inflation, government expenditure and money supply using annual time-series data for 40 observations over the period 1980–2019.

Findings

The augmented Dickey–Fuller unit root test shows that money supply, government spending and consumer price index are integrated at first difference I (1), while RGDP is stationary at level I (0). The results of the NARDL cointegration test indicate that the variables are cointegrated. The study shows that government expenditure is a positive function of both positive and negative changes. Hence, both positive and negative cumulative sum government expenditures improve economic growth but show a relative weak asymmetric effect with the regressand. This study also reveals that inflation is a negative function of both positive and negative changes with asymmetric effect with the dependent variable. This study shows that the positive change of money supply is statistically insignificant in boosting economic growth, while the negative change positively improves economic growth. Conclusively, this article shows that fiscal policy has a greater and more responsive than monetary policy in promoting growth and development in Sierra Leone. The result of the error correction term of the NARDL model shows a high spend of adjustment of 135% from any disequilibrium of GDP imbalance in the economy.

Originality/value

To address the problem of fiscal dominance in Sierra Leone, this study recommends that fiscal and monetary policies should be coordinated simultaneously and to an appropriate extent to achieve the desired outcome in growth and development.

Details

African Journal of Economic and Management Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-0705

Keywords

Article
Publication date: 4 July 2022

Felix Amoaning and Ferdinand Ahiakpor

The study aims to investigate the role of monetary policy in encouraging economic growth through bank loans, as well as estimating the optimal monetary policy rate (MPR)…

Abstract

Purpose

The study aims to investigate the role of monetary policy in encouraging economic growth through bank loans, as well as estimating the optimal monetary policy rate (MPR), which may be damaging to Ghana's economic growth if exceeded.

Design/methodology/approach

Using annual data spanning from 1990 to 2017, the authors used Autoregressive Distributed Lag (ARDL) econometric approach to investigate the impact of monetary policy on economic growth. Lind and Mehlum (2010) U test estimation technique is used in determining the threshold level.

Findings

The empirical findings demonstrated that the monetary transmission mechanism through the credit channel is poor in the long run, and the effectiveness of monetary policy is dependent on the financial sector's performance. A non-monotonic relationship between monetary and economic growth was also discovered in the study. As a result, the Monetary Policy Committee (MPC) should not adopt an interest rate for monetary policy that surpasses 23.7%.

Practical implications

Because of the non-monotonic link between MPR and economic growth, it is necessary to expand the financial market and ensure that the policy rate does not exceed the threshold level.

Originality/value

To the best of the authors' knowledge, this is one of the first studies to look at the MPR as a potential source of negative economic growth. The paper's findings could aid the MPC in determining the MPR. A MPR that is too high could eventually damage the financial sector and lead to economic disasters.

Details

African Journal of Economic and Management Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-0705

Keywords

Book part
Publication date: 13 May 2019

Rosaria Rita Canale and Rajmund Mirdala

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II…

Abstract

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

Details

Fiscal and Monetary Policy in the Eurozone: Theoretical Concepts and Empirical Evidence
Type: Book
ISBN: 978-1-78743-793-7

Keywords

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Abstract

Details

Quantitative and Empirical Analysis of Nonlinear Dynamic Macromodels
Type: Book
ISBN: 978-0-44452-122-4

Abstract

Details

The Impacts of Monetary Policy in the 21st Century: Perspectives from Emerging Economies
Type: Book
ISBN: 978-1-78973-319-8

Book part
Publication date: 1 October 2014

Xuan Vinh Vo and Phuc Canh Nguyen

A thorough understanding of transmission mechanism is a key to a successful conduct of monetary policy. This chapter attempts to improve knowledge in this respect by…

Abstract

A thorough understanding of transmission mechanism is a key to a successful conduct of monetary policy. This chapter attempts to improve knowledge in this respect by examining the impacts of commercial bank risks on the transmission of monetary policy. We investigate the impact of monetary policy on bank risk in Vietnam pre and post 2008 global financial crisis employing a unique and disaggregated bank level data set from 2003 to 2012. The results of panel data estimation indicate that the bank lending channel of monetary is evidenced in Vietnam. In addition, we find that the transmission mechanism is affected by characteristics of commercial banks.

Details

Risk Management Post Financial Crisis: A Period of Monetary Easing
Type: Book
ISBN: 978-1-78441-027-8

Keywords

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

1 – 10 of over 33000