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Transmission of central bank communication to emerging economies: Evidence from the Korean stock market

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  • Jang, Hyeonung
  • Seo, Byoung Ki

Abstract

This study analyzes the impact of US central bank communication on financial markets in emerging economies. We find that informal communication from the Fed positively influences the Korean stock market at a greater magnitude than the US stock market. The results show that the Korean stock market experienced higher excess return when Korea's monetary policy decisions are uncertain, suggesting that central bank communication in central countries could transmit to emerging economics through their monetary policy decisions and uncertainty. In addition, various portfolios and individual equities have a positive market risk-return tradeoff in the presence of Fed communication only.

Suggested Citation

  • Jang, Hyeonung & Seo, Byoung Ki, 2022. "Transmission of central bank communication to emerging economies: Evidence from the Korean stock market," Emerging Markets Review, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:ememar:v:52:y:2022:i:c:s156601412200022x
    DOI: 10.1016/j.ememar.2022.100905
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Central bank communication; International transmission; Emerging stock market;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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