Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

doi:10.17576/jem-2021-5502-6

Cited by 5 publications

(4 citation statements)

References 40 publications

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“…Consequently, the investors will believe that national economic policy will be stable and consistent (Pastor & Maxfield, 1999). This evidence appears to support the work of Förch and Sunde (2012) and Anwar (2021a), who found that CBI changes are related to higher stock traded. The different effect of the CBI on stock traded in both groups could be because there is a different market capitalization in both groups.…”

Section: Empirical Findingssupporting

confidence: 88%

“…Consequently, the investors will believe that national economic policy will be stable and consistent (Pastor & Maxfield, 1999). This evidence appears to support the work of Förch and Sunde (2012) and Anwar (2021a), who found that CBI changes are related to higher stock price returns over 1 month. Nonetheless, stock price does not respond significantly over a period of 12 months after the CBI shock.…”

Section: Empirical Findingssupporting

confidence: 87%

“…They confirm that CBI has a positive impact on stock market return. Anwar (2021a) studied the effect of CBI on stock price in seven developing countries and found that CBI effectively improve stock price. Anwar (2022) examined the effect of CBI on exchange rate in developing countries.…”

Section: Literature Reviewmentioning

confidence: 99%

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Measuring Response of Stock Market to Central Bank Independence Shock

Anwar

Suhendra

2023

Sage Open

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This paper examines the responses of stock traded and economic activity in relation to central bank independence shocks. The analysis is based on a panel Vector Autoregressive estimation covering 25 developing countries for a quarterly period between 1990 Q1 and 2021 Q4. Panel VAR estimation is known to be potentially biased in a dynamic panel data model if the coefficient on the endogenous variables differs across countries. To test the pooling assumption of the model, this paper applies the Chow and Roy-Zellner tests. The results establish that the models contain the heterogeneity among samples; thus, mean-group estimation for panel VAR is performed as a solution for heterogeneity problem. The results show that there is a delayed effect of CBI to increase stock traded. This demonstrates that CBI takes around six quarters to strengthen the financial market. By dividing the sample into two groups, we find that CBI has a different effect on stock traded for countries that have high and low stock traded.

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Section: Empirical Findingssupporting

confidence: 88%

“…Consequently, the investors will believe that national economic policy will be stable and consistent (Pastor & Maxfield, 1999). This evidence appears to support the work of Förch and Sunde (2012) and Anwar (2021a), who found that CBI changes are related to higher stock price returns over 1 month. Nonetheless, stock price does not respond significantly over a period of 12 months after the CBI shock.…”

Section: Empirical Findingssupporting

confidence: 87%

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Measuring Response of Stock Market to Central Bank Independence Shock

Anwar

Suhendra

2023

Sage Open

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“…Globalization has increased capital mobility and international trade, affecting in larger CA deficits for many nations [2,3,4] The 2008-09 global financial crisis caused the world economic growth to drop to -1.6% in 2009 from 4.3% in 2007. This showdown negatively impacted international financial markets, workforce, industrial production, and consumption [5]- [7]. The economic recession could have resulted from several important indicators, such as rising world oil prices, which pushed up food prices, resulting in global inflation [8].…”

Section: Introductionmentioning

confidence: 99%

Exchange Rate and Current Account Balance: Evidence from ASEAN-5 Countries

Anwar,

Suhendra,

Ginanjar

et al. 2023

Proceedings of the International Conference on Sustainability in Technological, Environmental, Law, Management, Social and Econ

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The aim of this paper was to analyse the impact of the exchange rate and other macroeconomic variables on the current account (CA) balance in 5 Southeast Asia countries between 1991 and 2021. The analysis of this study employs panel data model with fixed effect estimation. The findings show that the currency rate negatively and significantly impacts the CA balance in ASEAN-5 countries. Furthermore, inflation has significantly negative impact, while economic growth and FDI positively and significantly affect the current account. Therefore, developing countries in Southeast Asia need to maintain their exchange rate to reduce the widening current account deficit and sustain positive investor sentiment. Furthermore, they need to increase economic growth, FDI inflows and reduce the inflation rate to increase the current account.

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Does Central Bank Independence Reduce Economic Vulnerability in Africa?

Messono,

Zambo,

Bouebe

2024

Int. J Fin Econ

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While many studies have highlighted the influence of the degree of central bank independence on economic and financial dynamics, less is known about its importance for economic vulnerability. The objective of this paper is to examine, for the first time, the effect of central bank independence on economic vulnerability in Africa. Based on the hypothesis that countries with more independent central banks are less vulnerable to external shocks, we estimate a dynamic panel model using the system generalised method of moments in a sample of 44 African countries between 1990 and 2017. Our results show that an independent central bank can significantly reduce the economic vulnerability of African countries by allowing monetary policy decisions to be made outside political influence, promoting financial stability, and strengthening the credibility of economic policy. These results remain robust to alternative measures of the main variables. Furthermore, the analysis of transmission mechanisms reveals that central bank independence has a negative effect on economic vulnerability in Africa through channels such as GDP growth, financial development, exchange rate misalignments and budget balance. We suggest that policymakers promote central bank independence in the development of public policies to address economic vulnerability in Africa.

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Heterogeneity Effect of Central Bank Independence on Asset Prices: Evidence from Selected Developing Countries

Cited by 5 publications

References 40 publications

Measuring Response of Stock Market to Central Bank Independence Shock

Measuring Response of Stock Market to Central Bank Independence Shock

Exchange Rate and Current Account Balance: Evidence from ASEAN-5 Countries

Does Central Bank Independence Reduce Economic Vulnerability in Africa?

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