Central bank's communication and markets' reactions: Polish evidence

Brzeszczyński, Janusz, Gajdka, Jerzy, Schabek, Tomasz and Kutan, Ali M (2021) Central bank's communication and markets' reactions: Polish evidence. International Journal of Emerging Markets. ISSN 1746-8809 (In Press)

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Official URL: https://doi.org/10.1108/IJOEM-09-2020-1061


This study contributes to the pool of knowledge about the impact of monetary policy communication of central banks on financial instruments' prices and assets' value in emerging markets.

Empirical analysis is executed using the National Bank of Poland (NBP) announcements about its monetary policy covering the data from the broad financial market in its three main segments: stock market, foreign exchange market and bonds market. The reactions are measured relative to the changes in the NBP announcements and also with respect to investors' expectations. Autoregressive conditional heteroscedasticity (ARCH) models with dummy variables are used as the main methodological tool.

Bonds market and foreign exchange market are the most sensitive market segments, while interest rate and money supply are the most influential types of announcements. The changes of the revealed new macroeconomic figures had more impact on assets' prices movements than the deviations from their expectations. Moreover, greater diversity of the Monetary Policy Council (MPC) members' opinions on the voted motions, captured in the MPC voting reports, is associated with more cases of statistically significant NBP communication events.

Practical implications
The findings have direct relevance for fund managers, portfolio analysts, investors and also for financial market regulators.

The results provide novel evidence about how the emerging financial market responds to monetary policy announcements. They help understand the nature of the impact of public information on financial assets' valuation and on movements of their prices, analysed comprehensively in three market segments, in the emerging market environment.

Item Type: Article
Additional Information: Funding information: This work was supported by the research funding from the Narodowe Centrum Nauki (NCN) / National Science Centre (NSC) in Poland (project number: 2015/19/B/HS4/03238).
Uncontrolled Keywords: Central bank, Macroeconomic announcements, Monetary policy, Emerging financial market reactions, Asset prices returns, National Bank of Poland (NBP), Stock market, Foreign exchange market, Bonds market
Subjects: L100 Economics
N100 Business studies
N300 Finance
Department: Faculties > Business and Law > Newcastle Business School > Accounting and Finance
Depositing User: John Coen
Date Deposited: 16 Sep 2021 11:35
Last Modified: 01 Oct 2021 15:26
URI: http://nrl.northumbria.ac.uk/id/eprint/47218

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