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Reaction of the Philippine stock market to domestic monetary policy surprises: an event study approach

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  • Maran, Raluca

Abstract

This paper uses an event study analysis to assess how stock prices in the Philippines have reacted to domestic monetary-policy changes using data at a daily frequency from 2017 to 2022. A major contribution of this paper is the construction of a monetary-policy surprise measure for the Philippines, as the difference between the actual change in the monetary policy rate and the change anticipated by professional forecasters. My results are consistent with the literature, suggesting that unanticipated monetary policy changes exert a significant influence on stock prices in the Philippines. Overall, I find that an unexpected increase of 25 basis points in the monetary policy rate increases stock prices by about 1.09% on average. These results are robust to the inclusion of additional control variables in the baseline regression model, such as the implementation of restrictions to economic activity to curb the spread of the COVID-19 outbreak or revisions to macroeconomic forecasts released concomitantly with the monetary-policy rate announcement.

Suggested Citation

  • Maran, Raluca, 2022. "Reaction of the Philippine stock market to domestic monetary policy surprises: an event study approach," MPRA Paper 114855, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114855
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    1. Mansur Abdurakhmanov, 2023. "Modelling the Effect of Bank of Russia Key Rate Forecasts on Market Participants' Expectations," Russian Journal of Money and Finance, Bank of Russia, vol. 82(2), pages 3-20, June.

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    More about this item

    Keywords

    Event study; government policy responses; monetary policy surprise; Philippines; stock market returns.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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