Impact Of Monetary Policy Research Articles

Unveiling the Yin and Yang of expansionary monetary policy: Differential impact on inequality in China based on a national-level survey

This study explores the impact of expansionary monetary policy (EMP) on both income and wealth inequality in China using data from a national-level survey, with a particular focus on the discernible trend of wealth inequality surpassing income inequality since the beginning of the 21st century. Our findings unveil a non-uniform relationship between EMP and income inequality. While it serves to mitigate disparities between middle and low-income groups, it simultaneously exacerbates gaps between middle and high-income groups. In terms of the impact on wealth inequality, EMP exacerbates disparities by amplifying the wealth of low, middle, and high-wealth strata, with the effect escalating from lower to higher wealth groups. Moreover, this study identifies the burgeoning real estate market as the pivotal factor amplifying the policy's influence on wealth inequality. By elucidating the varied effects of EMP on income and wealth inequality, this study provides policymakers in transitioning economies with valuable insights to address inequality issues.

Evaluation of the Impact of Monetary Policy on the Financial Performance of Manufacturing Companies: Implications of Interest Rates, Inflation and Macroeconomic Stability

This study aims to evaluate the impact of monetary policy on the financial performance of manufacturing companies in Indonesia, emphasising the implications of interest rates, inflation, and macroeconomic stability. Using a quantitative approach through multiple regression analysis, this study analyzes the relationship between monetary policy variables of Bank Indonesia's benchmark interest rate, inflation rate, exchange rate, foreign exchange reserves, and budget deficit with the company's financial performance, as measured using Return on Assets (ROA), Return on Equity (ROE), and Net Profit Margin (NPM). Secondary data used in this study include the annual financial reports of manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2015-2023. The study results indicate that the benchmark interest rate has a significant negative effect on ROA and ROE. In contrast, the inflation rate shows varying impacts on NPM and other financial performance. In addition, macroeconomic stability is measured through indicators of the rupiah exchange rate against the USD, foreign exchange reserves, and budget deficit, which significantly affect the company's financial performance. These findings emphasize the importance of monetary policy and macroeconomic stability in determining the profitability of manufacturing companies in Indonesia. This study implies that corporate management needs to develop more adaptive strategies to deal with fluctuations in monetary policy and macroeconomic conditions. In addition, policymakers need to consider the long-term impact of monetary policy on the manufacturing sector to create an economic environment conducive to industrial growth. This study contributes significantly to the literature on the impact of monetary policy on corporate financial performance in emerging markets.

Central bank information effects in Japan: the role of uncertainty channel

AbstractThis study identifies central bank information shocks and pure monetary policy shocks for Japan by combining high-frequency identification with sign restrictions. The empirical findings provide robust evidence of the central bank information effect in Japan. Specifically, the central bank’s optimistic outlook, conveyed through contractionary monetary actions, reduces economic uncertainty and leads to increases in stock prices and output. Additionally, changes in uncertainty play a significant role in the transmission of the central bank’s information effect. The overall impact of monetary policy and information shocks, as identified through our method, is found to be larger than that identified using conventional techniques such as Cholesky decomposition.

Pengaruh Kebijakan Moneter dan Fiskal terhadap Pengangguran di Indonesia

The purpose of this study is to analyze the impact of monetary policy as seen from the BI Rate and the money supply (M2, and fiscal policy as seen from government spending and tax revenue in influencing the unemployment rate in Indonesia. The approach used in this research is quantitative. The data used are the BI Rate, the money supply (M2), government spending, tax revenue and unemployment in the form of time series data in an annual form from 1995 to 2019. The method used in this study is the Vector Auto analysis model. Regression (VAR). The stages used in this research test are a stationarity test, optimum lag test, VAR stability test, impulse response test, and variance decomposition test. The results of the impulse response indicate that the unemployment variable responds most to the shock of the interest rate variable (monetary policy) compared to other variables. The results of variance decomposition indicate that the contribution given by the BI Rate to the unemployment rate is the most significant relative to the contribution given by the variable money supply (M2), government spending, and tax revenue.

How effective are trade policy and monetary policy in achieving a pathway to sustainable development? Evidence from a wavelet quantile‐on‐quantile Granger causality analysis

AbstractThe paper explores the impact of trade policy (TRP) and monetary policy (MP) on CO2 emissions in the United States over the period February 1, 1988–December 12, 2022. The study employed wavelet quantile‐on‐quantile regression (WQQR) to explore the relationship across different quantiles and time‐scales. Furthermore, the present study introduced wavelet quantile‐on‐quantile Granger causality (WQQGC) to explore the predictive power of the independent variable over the dependent variable with a focus on different time‐scales and quantiles. The use of wavelet quantile‐based tools is supported by the nonlinear and non‐normal distribution of the variables. The results from WQQR show that in the short and medium term, an increase in renewable energy consumption (REC) in the United States is accompanied by an increase in CO2 emissions. However, in the long term, across all quantiles, REC effectively reduces CO2. In the short and medium term, the negative impact of TRP on CO2 emissions is apparent; however, we observed a supportive positive effect of TRP on reducing CO2 emissions in the long term. Across all periods, the influence of MP on CO2 emissions is generally weak yet positive; however, there are instances of negative associations. Across all quantiles in the short term, the impact of natural gas on CO2 emissions remains positive, although this positive effect diminishes in the long term. Finally, all the regressors can significantly predict CO2 emissions at dissimilar quantiles and time‐scales. The study formulates Sustainable Development Goals policies based on the above findings.

Beyond the Dinar: Deciphering Monetary Policy Shocks in Kuwait’s Equity Market

Purpose: This study investigates the impact of US and Kuwait monetary policy on the Kuwait Stock Exchange (KSE). Study design/methodology/approach: Our study employs an event study approach focused on Federal Open Market Committee (FOMC) announcement dates to analyze the impact of US and Kuwait monetary policy on the Kuwait Stock Exchange. By utilizing futures markets, we distinguish between the expected and unexpected components of these announcements.Sample and data: A time series dataset of KSE main indices between 2012 and 2024. Results: US monetary policy strongly impacts KSE, which is predominantly driven by the anticipated component of monetary policy change. KSE is responsive to the unanticipated component predominantly for information shock samples. KSE became more responsive to monetary policy after privatization in 2018. The Premier Market segment is more responsive to monetary policy impact than the Main Market segment. Monetary policy has a different effect and is not uniform among the various industries within KSE. Finally, Kuwait’s monetary policy does not have the same impact on KSE as US monetary policy. Originality/value: Our paper is the first to examine the impact of monetary policy on KSE by decomposing monetary policy changes into expected and unexpected components. We further decompose shocks into monetary or information shocks. We contribute to understanding the interactions between monetary policy and equity markets in emerging economies. Research limitations/implications: The study’s findings show that KSE efficiently processes public information and is responsive to US fed rate changes rather than local discount rate changes.

Monetary policy impact on sustainability: Analyzing interest rates and corporate carbon emissions

This study aims to investigate the impact of monetary policy on firms’ carbon emissions. The primary focus is on the effect of increasing interest rates on the carbon footprint of companies, both prior to and following the implementation of the Paris Agreement in 2015. The results show that there is a positive relationship between interest rates and carbon emissions indicating that in the face of increasing interest rates, companies are more likely to choose short-term financial stability above long-term sustainability objectives. This positive relationship is less prevalent following the Paris Agreement suggesting that policymakers should continue to strengthen global climate initiatives as a pressure for companies to invest in green activities. Additional evidence suggests that the impact of interest rates on carbon emissions is particularly noticeable in situations characterized by elevated levels of economic and policy uncertainty, weak corporate governance quality, and poor investor protection. These results are robust to endogeneity concerns, alternative measures of interest rates, carbon emission, and alternative samples.

The Impact of Monetary Policy in Achieving Exchange Rate Stability in the Iraqi Economy for The Period (1990 - 2023) an Econometric Study

The exchange rate is a monetary economic indicator that expresses a country's economic performance. The exchange rate is the basic foundation on which the economies of any country in the world are built, whether developed or developing. As a result, most governments seek to implement regulations that ensure the currency exchange rate remains stable. To avoid the radical changes that currencies will endure during another period. The exchange rate also plays a prominent role in monetary policy, due to its use as an intermediate target, or as a tool, or simply as an indicator of the competitiveness of countries through its impact on components of economic growth such as investment, the degree of economic openness, the inflation rate, the narrow money supply, and the volume of exports. And the volume of imports, and foreign exchange reserves. Therefore, the primary goal of this study was to try to identify the nature of the exchange rate. As a result, in the first section, we discussed the concept of monetary policy, its most important tools, its most important goals, the exchange rate, and Iraq’s experience in the field of exchange during the period (1990-2023). While the second section was devoted to measuring the impact of monetary policy in achieving stability in the exchange rate of the Iraqi dinar against the US dollar using the vector model. correcting the mistake. The study concluded with some recommendations to reduce exchange rate fluctuations.

The impact of collateral-based monetary policy on green financing cost: an analysis of the People's Bank of China’s approach

ABSTRACT This paper examines the effects of the collateral-based monetary policy, implemented by the People’s Bank of China, on green financing costs. Employing a Difference-in-Differences (DID) method to examine credit spreads of financial bond in primary and secondary markets from 2017 to 2019, our findings highlight a significant decrease of 26 basis points (bps) in the financing costs of green financial bonds in the primary market, with a 12-bps decline in the secondary market post-policy. Our study underscores the crucial role of implicit credit enhancement provided by the People’s Bank of China's collateral endorsement. Interestingly, the liquidity provision mechanism, where investors pay premiums to secure liquidity support, does not find empirical backing in the specific context of China's bond market. These findings illuminate the effectiveness of collateral-based monetary policies in reducing green financing costs, offering valuable insights for using collateral strategies to green monetary policies.

The Impact of Monetary Policy on Credit Reporting in The Iraqi Banking System

The Impact of Monetary Policy on Credit Reporting in The Iraqi Banking System

Impact of Monetary Policy on Stock Market Volatility

Purpose: The general objective of the study was to analyze the impact of monetary policy on stock market volatility. Methodology: The study adopted a desktop research methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library. Findings: The findings reveal that there exists a contextual and methodological gap relating to the impact of monetary policy on stock market volatility. Preliminary empirical review revealed that monetary policy exerts significant influence on stock market volatility through various channels such as interest rate adjustments, quantitative easing, and forward guidance. It highlighted that the timing and clarity of policy announcements play a crucial role in shaping market reactions, with unexpected shifts often leading to heightened volatility. Global interconnectedness amplified these effects, underscoring the need for coordinated policy responses. Behavioral factors also contributed, as investor sentiment and market psychology could magnify volatility independently of economic fundamentals. Understanding these dynamics is crucial for effective policy design and market stability amidst evolving financial landscapes. Unique Contribution to Theory, Practice and Policy: Efficient Market Hypothesis (EMH, Rational Expectations Theory and Keynesian Economics may be used to anchor future studies on monetary policy on stock market volatility. Recommendations from the study included integrating behavioral finance models into economic frameworks to enhance predictive accuracy. It advocated for clearer and more consistent central bank communications to align market expectations with policy actions, reducing uncertainty-driven volatility. Collaborative efforts among central banks were emphasized to manage international spillovers and enhance global financial stability. Adaptive policy frameworks were proposed to respond flexibly to changing market conditions while promoting regulatory measures to safeguard against excessive risk-taking. These recommendations aimed to foster a stable financial environment supportive of sustainable economic growth and market confidence.

Impact of Monetary Policy on Corporate Capital Structure Adjustment in a Financial Development Environment

This study aims to investigate the impact of monetary policy on the adjustment of corporate capital structure within the environment of financial development, focusing on listed companies at the Shenzhen Stock Exchange. Utilizing data from 2011 to 2021, the research employs regression analysis and generalized method of moments (GMM) to explore how quantity-based and price-based monetary policies influence capital structure adjustments. The findings indicate that changes in monetary policy significantly affect corporate capital structure adjustments. Specifically, quantity-based monetary policies accelerate these adjustments, though their impact is moderated by the level of financial development. In contrast, price-based monetary policies consistently exert a positive influence on capital structure adjustments. This study contributes to the understanding of monetary policy's role in corporate finance, providing empirical evidence from China's evolving financial market.

China's monetary policy framework and global commodity prices

This paper examines the effects of China's monetary policy on global commodity prices over the quarterly period 1996:Q1–2021:Q4. Using a Bayesian Structural VAR model, we evaluate the impact of interest rate shocks (as a price rule) and shocks to the monetary aggregate (M2) (as a quantity rule) on those commodity prices. Our main findings are fourfold. First, a positive interest rate shock has a negative and persistent effect on commodity prices, with beverages and metals commodity prices falling the most in response to such shock. Second, a positive shock to the growth rate of M2 has a strong impact on the prices of non-fuel commodities, agricultural raw materials, and metals. Still, the highly volatile food and fuel (energy) commodity prices are less affected. Third, while both the growth rate of M2 and the interest rate seem relevant macroeconomic stabilizers, the quantity instrument appears more effective than the price instrument in explaining commodity prices. Finally, while interest rate hikes are linked with a persistent rise in world uncertainty, monetary expansions lead to a long-lived fall in this variable. All in all, our study provides new evidence about the impact of China's monetary policy on global commodity prices using a rich dataset and an econometric setup that accounts for uncertainty.

Monetary Policy Impact on Stock Returns for Selected South Asian Countries

Monetary Policy Impact on Stock Returns for Selected South Asian Countries

Quantitative easing and correlation dynamics in the aftermath of the Great Recession: A dynamic conditional correlation with exogenous variables approach

AbstractIdentifying the effects of quantitative easing (QE) on asset return correlations is critical to assessing such policies’ impact across financial markets. In this paper, we use a dynamic conditional correlation model that allows us to measure the impact of unconventional monetary policy on time‐varying correlations. Our results suggest that QE significantly affected correlations between stocks and bonds after the Great Recession via short‐term portfolio balance effects. The findings are critical for policy‐makers and practitioners alike. Central banks should consider the impact of monetary policy on asset correlations in their cost–benefit analyses. Likewise, portfolio managers are encouraged to factor in the effects of monetary policy on correlations to optimize portfolios and reduce potential losses strategically.

Uncertainty and the transmission of monetary policy via bank liquidity creation

PurposeThis paper investigates the moderating role of uncertainty in the impact of monetary policy on bank liquidity creation.Design/methodology/approachUtilizing data from Vietnam spanning 2007–2022, the paper measures uncertainty in the banking industry through the dispersion of shocks to crucial bank-level variables and considers both interest rate- and quantity-based tools of the monetary policy regime. The study regresses economic models using different econometric methods, including the generalized method of moments (GMM) estimator in the main section and the least squares dummy variable corrected (LSDVC) estimator for the robustness check.FindingsMonetary expansion enhances banks’ ability to create liquidity, affirming the existence of the bank liquidity creation channel. Further analyses suggest that monetary policy adjustments aimed at regulating bank liquidity creation may be less effective in the presence of higher uncertainty in the banking system. This observation holds for both interest rate- and quantitative-based monetary policy tools, emphasizing the functioning of the monetary policy transmission mechanism through bank liquidity creation and the mitigating effect of uncertainty.Originality/valueThis study contributes novel insights to the existing literature by presenting the first attempt to explore the dynamics of monetary policy transmission through the bank liquidity creation channel in the context of banking sector uncertainty. Moreover, our contribution extends to examining a multi-tool environment, incorporating both interest rate- and quantitative-based indicators.

Teaching IS-LM macroeconomics through material balance diagrams

This study proposes a material balance approach to teaching the IS-LM model. It introduces an easy-to-visualize box diagram approach for representing goods market equilibrium where all the income and expenditure components are simultaneously visible. Similarly, for the money market, it introduces line diagrams to visually represent the demand and exogenous supply of real liquidity. The material balance diagrams can be used to demonstrate shifts in the IS and LM curves, as well as to show the impact of monetary and fiscal policies on all components of the goods and money markets at the same time. The ability to simultaneously depict the interplay of many variables enables these diagrams to overcome the limitations of two-dimensional graphs.

Monetary Policy and Income Distribution: The Post-Keynesian and Sraffian Perspectives

ABSTRACT This paper examines the post-Keynesian and Sraffian perspectives on the relationship between monetary policy and income distribution, highlighting their endogenous demand-led money approach and rejection of the neutrality of interest rates, and monetary policy as tool of redistribution among social classes. Both approaches acknowledge that the central bank can influence interest rates and hence, the functional distribution of income. These shared ideas recognize the political nature of interest rates and the distributive impacts of monetary policy. Although all are crucial common points, some differences persist; PK theory often emphasizes the impact of monetary policy on rentiers vs. non-rentier classes, while Sraffians focus more on wage earners vs. non-wage earners. Further, while PK theorists advocate for alternative monetary policy rules, Sraffians favor discretionary policy tailored to each economy's unique institutional framework. The paper concludes by suggesting that these shared critical conceptions, despite minor differences, should stimulate collaborative efforts to further develop heterodox theories of monetary policy and income distribution.

Deposit Insurance and Bank Liquidity Creation: Evidence from a Natural Experiment in China*

AbstractIn this paper, we examine how the implementation of deposit insurance influences the impact of bank capital, excess lending, banking competition and monetary policy on liquidity creation of banks. Our examination uses China’s introduction of deposit insurance in 2015 as a natural experiment. We find that deposit insurance positively reinforces the effect of capital but weakens that of monetary policy on liquidity creation. We do not find that deposit insurance has a significant influence on the effects of excess lending and competition on the liquidity creation of banks. We also show that the implementation of deposit insurance has heterogenous effects on the liquidity creation of large and small banks.

Monetary Policy, Capital Regulation and Systemic Risk in Commercial Banks: Evidence from in China

This paper examines the impact of monetary policy and capital regulation on commercial banks' systemic risk using a fixed panel model with data from 16 listed commercial banks in China from Q1 2011 to Q4 2019. The results show that both quantity-based monetary policy instruments, represented by currency issuance, and price-based monetary policy instruments, represented by interest rates, affect systemic risk. And they both show that accommodative monetary policies amplify commercial banks systemic risk. Besides, capital regulation has a dampening effect on systemic risk, and the intensity of regulation moves inversely with systemic risk. In addition, there is a synergistic effect between monetary policy and capital regulation. Furthermore, a symbiotic relationship exists between monetary policy and capital regulation. The findings of this study assist nations in managing systemic financial risks through macroeconomic policies.