The channels of monetary policy triggered by central bank actions and statements in the Australian equity market

McCredie, Bronwyn, Docherty, Paul, Easton, Steve, & Uylangco, Katherine (2016) The channels of monetary policy triggered by central bank actions and statements in the Australian equity market. International Review of Financial Analysis, 46, pp. 46-61.

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Owing to the discrete disclosure practices of the Reserve Bank of Australia, this paper provides new evidence on the channels of monetary policy triggered by central bank actions (monetary policy announcements) and statements (explanatory minutes releases), in the Australian equity market. Both monetary policy announcements and explanatory minutes releases are shown to have a significant and comparable impact on the returns and volatility of the Australian equity market. Further, distinct from US and European studies that find strong evidence of the interest rate, bank loan and balance sheet channels and no evidence of the exchange rate channel following central bank actions, this paper finds that monetary policy impacts the Australian equity market via the exchange rate, interest rate and bank loan channels of monetary policy, with only weak evidence of the balance sheet channel of monetary policy. These channels are found to be operating irrespective of the trigger (monetary policy announcements or explanatory minutes releases), though results are somewhat weaker when examining the explanatory minutes releases. These results have important implications for central bank officials and financial market participants alike: by confirming a comparable avenue to affect monetary policy; and providing an explication of its impact on the Australian equity market.

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ID Code: 95366
Item Type: Journal Article
Refereed: Yes
Keywords: Channels of monetary policy, Central bank intervention, Monetary policy announcement, Explanatory minutes release, Equity market
DOI: 10.1016/j.irfa.2016.04.008
ISSN: 1057-5219
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2016 Elsevier Inc.
Deposited On: 04 May 2016 00:00
Last Modified: 05 May 2016 00:44

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