On the Linkage between Monetary Policy and MENA Stock Markets?

41 Pages Posted: 3 Oct 2007

See all articles by Sami Ben Naceur

Sami Ben Naceur

International Monetary Fund (IMF)

Adel Boughrara

University of Sousse

Samir Ghazouani

Higher School of Statistics and Information Analysis (ESSAI)

Date Written: October 2007


Relatively little empirical evidence is available that estimates the relationship between asset price movements and monetary policy measures. This paper, which is the first study that focus on the linkage between monetary policy and stock market prices, aims at analyzing the interaction between monetary policy and asset markets in eight MENA countries. The countries that have to be considered in this study are: Bahrain, Egypt, Jordan, Morocco, Oman, Saudi Arabia, Tunisia, and Turkey. To this end, VAR methodology is used. The nature of the relationship between asset prices movements and monetary policy is currently a hotly debated topic in macroeconomics. The chief findings this study puts forward are the following: (i) In Bahrain, Oman, Jordan and Saudi Arabia the monetary policy seems to have a significant impact on stock market returns. (ii) The monetary policies of Tunisia, Morocco and to a less extent that of Egypt do not impact significantly on equity prices. (iii) Better still, the monetary policies' reactions, to stock market prices movements, are far from being homogenous across countries. While Saudi Arabia and Jordan monetary authorities respond vigorously to an increase in stock market returns, the other countries do not seem to exhibit any reaction. The paper attempts to put forth some explanations.

Keywords: Monetary policy, Stock market, MENA countries, VAR methodology

JEL Classification: E44, E52, E58, G1.

Suggested Citation

Ben Naceur, Sami and Boughrara, Adel and Ghazouani, Samir, On the Linkage between Monetary Policy and MENA Stock Markets? (October 2007). Available at SSRN: https://ssrn.com/abstract=1018727 or http://dx.doi.org/10.2139/ssrn.1018727

Sami Ben Naceur (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Adel Boughrara

University of Sousse ( email )

rue Abdelaziz el Behi
Sousse, Sousse 4000

Samir Ghazouani

Higher School of Statistics and Information Analysis (ESSAI) ( email )

6, Rue des métiers
Charguia II, 2035
+216 70 839 440 (Phone)
+216 70 838 170 (Fax)

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