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Do financial markets react to emerging economies’ asset purchase program? Evidence from the COVID-19 pandemic period

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  • Prabheesh, K.P.
  • Padhan, Rakesh
  • Bhat, Javed Ahmad

Abstract

We employ the daily data on bond yield, stock return, and exchange rate to explore their reaction to the large-scale asset purchase program for 8 emerging market economies during the COVID-19 pandemic period. Using event study analysis, we find that: (1) out of 8 emerging economies, 6 economies’ financial markets react to the asset purchase announcements. (2) Most economies witnessed a rise in stock return, and a fall in the yield rate. (3) 2 economies witnessed currency appreciation, while 3 economies experience currency depreciation. Overall, the asset purchase announcements have a mixed effect on the stock, bond, and foreign exchange markets. Hence, these should be included in the central bank’s toolbox as complementary instruments applied to address certain unprecedented economic circumstances.

Suggested Citation

  • Prabheesh, K.P. & Padhan, Rakesh & Bhat, Javed Ahmad, 2024. "Do financial markets react to emerging economies’ asset purchase program? Evidence from the COVID-19 pandemic period," Journal of Asian Economics, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:asieco:v:90:y:2024:i:c:s1049007823000982
    DOI: 10.1016/j.asieco.2023.101678
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    More about this item

    Keywords

    Asset purchase program; Stock return; Yield rate; Exchange rate; Event study analysis;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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