McCallum (1994a) proposes a monetary rule where policymakers have some tendency to resist rapid changes in exchange rates to explain the forward premium puzzle. We estimate this monetary policy reaction function within the framework of an affine term structure model to find that, contrary to...

This article investigates the empirical relationship between monetary policy in the United States (US) and international equity, bond and real estate security markets for the sample period 01/1994 to 12/2007. The empirical results suggest that equity markets close to the US have a statistically...

In this paper we confront the data with the financial-market folk wisdom that monetary policy is one of the key drivers of nominal exchange rates. Focusing on measures of conventional and unconventional monetary policy, we find that monetary policy surprises and changes in expectations about...

We study the correlation between pairs of bond and stock markets in Canada and the United States between January 1998 and December 2006 in the framework of Diagonal-BEKK models. Our research question is whether monetary policy action and communication by the Bank of Canada and the Federal...

Since the Federal Open Market Committee (FOMC) began announcing its policy decisions in 1994, U.S. stock returns have on average been more than thirty times larger on announcement days than on other days. Surprisingly, these abnormal returns are accrued before the policy announcement. The excess...

This paper attempts to identify how monetary policy shocks affect stock prices by using Mundell and Fleming's theory of the "Impossible Trinity". According to this theory, it is impossible to simultaneously have a fixed exchange rate, free capital movement (an absence of capital controls), and...

This paper presents forecasts of currency in circulation prepared for liquidity management at the Central Bank of Nigeria. Forecasts were produced using ARIMA, ARIMA with structural variables, VAR and VEC models. The performance of the forecasts was then evaluated under a rolling forecast...

This empirical study examines the stability of Islamic banks during the subprime crisis. It covers a sample of fourteen Islamic banks and fourteen conventional banks. The conditional variance (volatility) of returns was used to measure stability. The E-GARCH and GJR-GARCH asymmetric models were...

In our model, cross-currency basis, which captures the deviations from covered interest rate parity (CIP), reflects the relative value of the scarcer currency (US dollar) as collateral in funding constraints. Our empirical evidence shows that measures of dollar shortage derived from ECB tenders,...

This paper aims to identify the effect of monetary policy shocks on stock prices through the lens of Mundell and Fleming's “Impossible Trinity” theory. Our identification strategy seeks to solve the simultaneity and omitted variable problems inherent in studies that focus on the effect of...