Effects of Inflation-Targeting Monetary Policy on Stock Market Returns
DOI:
https://doi.org/10.17533/udea.le.n102a354263Keywords:
Política monetaria, metas de inflación, estudio de eventos, hipótesis del mercado eficiente, retornos del mercado bursátilAbstract
The aim of this paper is to study the effects of monetary policy with inflation targets on Peruvian stock market returns for the period 2012-2023. Following the event study methodology, we worked with 70 observations of the reference rate and 70 observations of the S&P/Peru Gen index returns. Based on the efficient market hypothesis, the information was separated into its expected and unexpected components. Following Kuttner (2001), a proxy for the unexpected component was estimated from interbank interest rates. It is concluded that a 1% increase in the interest rate generates a 0.277% increase in market returns and vice versa, with a statistically significant positive relationship. The results suggest that the LSE is an efficient market and that the stock market does not always respond to monetary policy as established by theory
Keywords: Monetary policy, inflation targeting, event study, efficient market hypothesis, stock market returns
JEL Classification: E52, E58, G1, G14
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