سیاست های پولی و قیمت سهام در اقتصادهای باز خرد : شواهد تجربی برای کشورهای جدید عضو اتحادیه اروپا

This study presents evidence on the effect of domestic and Euro Area monetary policy on stock prices in four new EU member states of Central Europe and the main determinants of stock price volatility, estimating structural vector autoregressive models identified with short-run restrictions. We find that stock prices in the considered new EU member states are more sensitive to changes in the Euro Area interest rate than to the domestic one. Moreover, the bulk of stock price volatility in these countries is due to shocks related to exchange rate and Euro Area monetary policy. Overall, we find that local stock markets are more sensitive to external shocks than to domestic ones.

In two recent waves of enlargement, ten Central and Eastern European countries (henceforth, CEECs) became members of the European Union, bringing the number of official members to 27.1 The liberalization of capital markets initiated in the beginning of the 1990s and EU membership stimulated financial integration both within these countries and between them, the Euro Area and the rest of the world. Since the beginning of the 1990s the new EU member states (henceforth, NMS) have been recipients of massive capital inflows, both in the form of foreign direct investment and, more recently, financial flows, originating mainly from Euro Area countries such as Austria and Germany, Finland for the Baltic countries and Greece for Bulgaria and Romania.2 According to Lane and Milesi-Ferretti (2007), the degree of international financial integration in the CEECs measured through the capital account has doubled since the beginning of the transition process. The sum of external assets and liabilities as a percentage of GDP was on average 80% in 1994 and rose to 160% by 2004. Financial integration between the old and new EU member states is not only reflected in increased financial flows, but also in the behavior of the stock markets. Recent studies by Christiansen and Ranaldo (2009), Savva and Aslanidis (2010) and Büttner and Hayo (2011) explore this issue by examining the extent of co-movement between stock prices in the Euro Area and in the NMS. While their methodologies differ, they all find strong linkages between stock markets in the two regions. In particular, the connection between old and new member states is found to increase after the 2004 EU enlargement, and seems to be a phenomenon typical of the European Union rather than a general tendency of increased worldwide financial integration. Büttner and Hayo (2011) find that exchange rate risk and indicators of financial deepening significantly explain the co-movement between European stock markets and conclude that euro adoption would increase stock market correlations between the old and new EU member states.3 The process of integration between Eastern and Western Europe is still ongoing, as full monetary integration has so far only been achieved by a few former transition economies4 that lost their monetary independence and delegated the conduct of monetary policy to the ECB. The remaining countries are expected to join the EMU as soon as they meet the conditions imposed by the Maastricht Treaty in terms of inflation, government finance and exchange rate. Prospects of EMU membership caused the proliferation, in recent years, of a large amount of studies focusing on assessing the extent of similarity of responses to monetary policy shocks both among the NMS and between them and the Euro Area. Such studies focused primarily on the effect of monetary policy on output and inflation, and reached different conclusions. On one side, Elbourne and De Haan (2006) find substantial heterogeneity among the former transition economies. On the other hand, Anzuini and Levy (2007) find that although impulse-responses for the NMS are qualitatively similar to those found for old EU members, they are quantitatively less pronounced. The authors relate this finding to the difference in the degree of financial development between the two regions. Jarociński (2008) compares the monetary transmission mechanism between the NMS and the Euro Area and finds similar responses of output and prices to monetary policy shocks. Here, we focus on the interplay between financial integration, monetary policy and stock prices. First, we examine the effect of domestic monetary policy on stock prices in the NMS, an issue not investigated so far. While monetary policy shocks are passed through the real economy with considerable delay, financial markets are much more reactive in that asset prices tend to quickly incorporate new information. Secondly, in light of the heavy financial linkages between the NMS and the Eurozone, we examine the response of the domestic stock market to Euro Area monetary policy shocks. In particular, we will interpret a significant response of the domestic stock markets to a Euro Area monetary policy shock as further evidence of financial integration. Thirdly, we determine which domestic and foreign variables are the main drivers of stock price movements in the countries under analysis. Our methodology is rather standard. We estimate a macro-econometric model of a small open economy using monthly observations on seven macroeconomic variables for the Czech Republic, Hungary, Poland and Slovenia. We identify the structural VARs by means of short-run restrictions following Neri (2004), Jarociński (2008) and Li et al. (2010) and examine impulse-response functions and forecast error variance decompositions. The study is structured as follows. In Section 2, we introduce the theoretical underpinning of our analysis and review the literature exploring the interplay between monetary policy and stock prices. Section 3 presents the baseline SVAR model, the identification scheme and the resulting equations. In Section 4 we report our results, after describing the dataset and testing for model adequacy. We assess the robustness of our results to alternative identification schemes in Section 5. Section 6 concludes and proposes directions for further research.

In this paper, we estimate four structural VAR models with short-run restrictions for the Czech Republic, Hungary, Poland and Slovenia. The models represent a small-scale, small open economy model with stock prices in order to examine the interplay between financial integration, domestic monetary policy and stock prices. Three conclusions can be drawn from our analysis. First, we do not find robust evidence of a significant effect of domestic monetary policy on stock prices. Second, Euro Area monetary policy significantly affects stock prices in the NMS, and the effect is negative. Moreover, in all countries except Slovenia (where the impact effect is also significantly negative), the response of the stock price index seems to be transmitted to stock prices with a lag. These results suggest that in small open economies characterized by a high degree of openness to international financial markets, foreign monetary policy has a stronger effect on stock markets than domestic monetary policy. In particular, in the NMS, firms rely heavily on foreign borrowing, originating mainly in Euro Area countries, to finance new investments. Hence, increases in the foreign interest rate represent an increase in their production costs, which in turn reduces expected future cash flow and stock prices. In addition, in emerging economies capital inflows amount to a large share of GDP, making them more sensitive to developments in foreign financial markets. Furthermore, in the NMS the proportion of wealth allocated to equity by domestic investors is still limited. Therefore, as the ECB rate is the reference discount rate for Euro Area investors, stock prices are sensitive to it. Third, the analysis of variance revealed that overall external shocks account for the bulk of variation in the stock price index in the considered countries. While exchange rate shocks are dominant in Hungary and Poland in the short run, shocks to the Euro Area interest rate are the main determinants in the medium to long run in Poland, in the long run in Hungary, and during the whole time horizon in Slovenia. Hence, stock prices in the new EU member states seem to be driven by shocks related to external trade and finance. These findings have important implications for domestic policy decisions, as financial integration made local stock markets more sensitive to external shocks. The presented analysis sheds a first light on an issue scarcely investigated before. Nevertheless, it omits important aspects worth exploring in future work. First of all, this study does not explore the channels through which Euro Area monetary policy shocks are transmitted to the NMS’ stock markets. Given the increased co-movement between stock markets in the Euro Area and the NMS, the significant reaction of NMS’ stock markets to Euro Area monetary policy shocks could result from spillovers between stock markets. Explicitly modeling financial linkages between the Euro Area and the NMS by means of a Global VAR model in the spirit of Dees et al. (2007) will be the subject of future research. Moreover, our results could be enriched by exploring the time constancy of the estimated responses of the stock price index in the NMS. In particular, a time-varying coefficients model would allow investigating whether such responses changed with the increase in financial integration.