اطلاعیه های سیاست های پولی و پویایی قیمت سهام در یک اقتصاد باز کوچک

Using a monetary framework with stock markets, this paper investigates dynamic behaviors of a small open economy with various adjustments in the manufacturing prices. For an instantaneous adjustment of the manufacturing prices, stock values and exchange rates may appear to misjump or misadjust at the instant of the monetary policy announcement. When the manufacturing prices adjust sluggishly, exchange rates may overshoot but stock values can exhibit various dynamic patterns, including overshooting or undershooting

Since the seminal paper of Jones (1965), the two sector model has become a representative framework to study economy's real activities of production, consumption and trade. The model was then utilized by Harris and Todaro (1970) to investigate sectoral interactions between rural agriculture and urban manufacturing in the dual economy. On the other hand, the monetary version of the general-equilibrium model was introduced by Frankel (1986), in which price adjustments of agricultural and manufactured goods can be over- or under-reacted during transitions. The above models, however, do not consider the impacts of the stock market on price dynamics and economic activities. In both developing and developed economies, stock markets play an important role in reflecting the value of wealth, which not only affects consumption but also investment and production. Stock prices can therefore serve as a good indicator to predict economic performance. In the literature of macroeconomics, Blanchard (1981) incorporated the stock market in the IS-LM analysis. Gavin (1989) investigated the effects of monetary and fiscal expansions on stock prices and exchange rates under the general price rigidity. Agénor (1995) examined the anticipatory dynamics associated with monetary policy shocks in an economy with an informal currency market. Su, Yip, and Wong (2002) discussed the impact of government intervention on stock returns. The purpose of this paper is to embody stock markets into the two-sector general-equilibrium model. We will investigate the impacts of monetary policy on the economy under different speeds of price adjustments. Specifically, the adjustment speed of manufacturing prices can be instant or sluggish, while the price of agricultural product adjusts instantaneously. Under these assumptions, dynamic behaviors of stock values and exchange rates will be examined. We will identify the conditions that lead to over-adjustments in these two variables in the sense of Dornbusch (1976) or misadjustments by the context of Aoki (1985). The organization of this paper is as follows. Section 2 describes the economy with instantaneous adjustments for both the prices of agricultural and manufactured goods. Section 3 characterizes the steady-state equilibrium and the dynamic behavior of the economy associated with an expansion in money supply. Section 4 extends the analysis to the case that the price of the manufactured good adjusts sluggishly. Main results are summarized in Section 5.

This paper has analyzed the price dynamics of a small open monetary economy, in which the adjustments of manufacturing prices can be sluggish or instantaneous. If manufacturing prices adjust instantaneously, stock values may exhibit a misjump or misadjustment at the instant of the monetary policy announcement when the contribution of dividends to stock returns is relatively less. In addition, exchange rates may also exhibit a misjump or misadjustment when the dividends contribute largely to stock returns. As for the case that the manufacturing price adjusts sluggishly, exchange rates can be overshot but adjustments in stock values can exhibit various dynamic patterns, including overshooting or undershooting. This finding is consistent with Dornbusch (1976) that whether or not the economy appears to overshoot is dependent upon the relative speeds of adjustments in the asset and commodity markets. In this situation, the adjustment patterns for stock values may exhibit overshooting or undershooting while exchange rates overshoot.