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Do emerging financial markets react to monetary policy announcements? Evidence from Poland

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  • Dobromł Serwa

Abstract

This paper provides evidence on the short-run reactions of an emerging financial market to monetary policy announcements. An instrumental variable estimation approach is employed, based on the 'identification through heteroscedasticity' technique, to estimate the impact of a change in the official interest rate and its surprise component on asset prices in Poland. The recently introduced methodology controls for possible feedback relationships between financial variables and official interest rate changes. In this analysis, the short-term interest rates respond significantly to official interest rate changes, but neither the long-term interest rates, stock indices, nor foreign exchange rates react to monetary announcements in the expected direction.

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  • Dobromł Serwa, 2006. "Do emerging financial markets react to monetary policy announcements? Evidence from Poland," Applied Financial Economics, Taylor & Francis Journals, vol. 16(7), pages 513-523.
    • Handle: RePEc:taf:apfiec:v:16:y:2006:i:7:p:513-523
    DOI: 10.1080/09603100500426481
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    Cited by:

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    2. Mariusz Kapuściński, 2017. "Monetary policy and financial asset prices in Poland," Bank i Kredyt, Narodowy Bank Polski, vol. 48(3), pages 263-294.
    3. Brzeszczyński, Janusz & Gajdka, Jerzy & Kutan, Ali M., 2015. "Investor response to public news, sentiment and institutional trading in emerging markets: A review," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 338-352.
    4. Brzeszczyński, Janusz & Kutan, Ali M., 2015. "Public information arrival and investor reaction during a period of institutional change: An episode of early years of a newly independent central bank," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 727-753.
    5. Karen Davtyan & Omar Elkaraksy, 2024. "Uncovering the Financial Effects of the Exchange Rate Regime Transition in Egypt," Working Papers wpdea2407, Department of Applied Economics at Universitat Autonoma of Barcelona.
    6. Prabu A, Edwin & Bhattacharyya, Indranil & Ray, Partha, 2016. "Is the stock market impervious to monetary policy announcements: Evidence from emerging India," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 166-179.

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