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Monetary policy shocks and multi-scale positive and negative bubbles in an emerging country: the case of India

Author

Listed:
  • Oguzhan Cepni

    (Ostim Technical University
    Copenhagen Business School)

  • Rangan Gupta

    (University of Pretoria)

  • Jacobus Nel

    (University of Pretoria)

  • Joshua Nielsen

    (Boulder Investment Technologies, LLC)

Abstract

We employ the Multi-Scale Log-Periodic Power Law Singularity Confidence Indicator (MS-LPPLS-CI) approach to identify positive and negative bubbles in the short-, medium, and long-term for the Indian stock market, using weekly data from November 2003 to December 2020. We use a nonparametric causality-in-quantiles approach to analyze the predictive impact of monetary policy shocks on bubble indicators. We find, in general, strong evidence of predictability across the entire conditional distribution for the two monetary policy shock factors, with stronger impacts for negative bubbles. Our findings have critical implications for the Reserve Bank of India, academics, and investors.

Suggested Citation

  • Oguzhan Cepni & Rangan Gupta & Jacobus Nel & Joshua Nielsen, 2025. "Monetary policy shocks and multi-scale positive and negative bubbles in an emerging country: the case of India," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 11(1), pages 1-25, December.
    • Handle: RePEc:spr:fininn:v:11:y:2025:i:1:d:10.1186_s40854-024-00692-6
    DOI: 10.1186/s40854-024-00692-6
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    More about this item

    Keywords

    Multi-scale positive and negative bubbles; Monetary policy shocks; Nonparametric causality-in-quantiles test; India;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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