Monetary Policy and the Investment Companies

Harun, Syed M.; Hassan, M. Kabir; Puri, Tribhuvan N.

doi:10.2139/ssrn.3263301

Cited by 1 publication

(1 citation statement)

References 28 publications

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“…We find few studies that explore the effectiveness of monetary policy for dual banking economies (El Alaoui et al , 2019; Omer, 2019; Selim and Hassan, 2019; Caporale et al , 2020). There are other studies (Hassan et al , 1998; Harun et al , 2005; Harun et al , 2008; Mamun and Hassan, 2014; Ashraf et al , 2017) that explore the monetary policy for other countries. Nevertheless, to the best of our knowledge, no study has made use of dynamic models to assess the association between monetary policy rate and Islamic index prices.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Monetary transmissions mechanism for Islamic capital markets: evidence from Markov switching dynamic regression approach

Anwer

Sabit

Hassan

et al. 2022

IMEFM

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Purpose This study akims to investigate the effectiveness of expansionary monetary policy for Islamic capital markets by studying the impact of decrease in policy rates on seven Islamic equity indices for the period 1996–2019. The transmission mechanism may be different for sampled indices, as they are exposed to Shariah screening that discards certain business sectors and puts limit on debt in capital structure. Design/methodology/approach This study uses Markov Switching dynamic regression approach of Hamilton (1988). Findings The results show little effectiveness of expansionary monetary policy in both Bear and Bull states, for most of the sample indices. Originality/value To the best of the authors’ knowledge, no study has made use of dynamic models to assess the association between monetary policy rate and Islamic index prices. Similarly, the authors found no work exploring the effectiveness of expansionary monetary policy actions in different regime for Islamic Indices. This investigation is important in unraveling whether, in the presence of limitations on selection of business activity and choice of capital structure, monetary policy can change the market sentiment, or it will be ineffective. The present study fills this gap.

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