Monetary Policy and Asset Pricing in MENA
39 Pages Posted: 18 Feb 2010 Last revised: 9 Jul 2010
Date Written: October 1, 2009
The linkage between monetary policy decisions and stock market performance is an important topic. Having reliable estimates of the reaction of asset prices to the policy instrument helps understanding and assessing the stock market channel for monetary policy transmission. The availability of such estimates helps to formulate effective policy decisions. However, relatively little empirical evidence is available on this issue, especially in developing and emerging countries. This paper attempts to fill this gap by analyzing the interaction between monetary policy and asset markets in seven MENA countries by making use of the SVAR methodology. The countries considered in this study are Egypt, Jordan, Morocco, Oman, Saudi Arabia, Tunisia, and Turkey. It has been found that the reactions of monetary policies to stock market price movements are far from homogenous across countries. The paper attempts to put forward some explanations.
Keywords: Monetary policy, Stock markets, MENA countries, SVAR methodology
JEL Classification: E44, E52, E58, G1
Suggested Citation: Suggested Citation