ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)
Hiroyuki Taguchi and Namjil Enkhbaatar
Correspondence: Hiroyuki Taguchi, tagusaya0710@s3.wh.qit.ne.jp
Graduate School of Humanities and Social Sciences, Saitama University, Japan
pdf (597.96 Kb) | doi:
Mongolian stock market is underdeveloped compared with its banking credit market, due to a lot of impediment factors to prevent its development. This means Mongolian economy still has much room where its stock market development promotes the long-term financing and investment into non-mining sectors for sustainable economic growth. This paper aims to provide the evidence on the relationship between stock market and macroeconomic policies in Mongolia under the hypothesis that the recent biases of fiscal and monetary policies would distort her stock-price formation. The empirical analysis in this study found that the cumulative public debt and too high policy rate have stagnated the stock prices, through identifying the negative impulse responses of stock prices to the shocks of policy rate and government securities under a vector-autoregressive model estimation. The strategic policy implication for normalizing the stock prices could be the significance in ensuring budget consolidation and in addressing a fear of floating in monetary policy management in Mongolia.
Stock Market; Fiscal policy; Government Securities; Monetary Policy; Policy Rate.
Afonso, A. and R.M. Sousa (2012) “The macroeconomic effects of fiscal policy”. Applied Economics, 44, 4439-4454.
Agnello, L. and R.M. Sousa (2013) “Fiscal policy and asset prices”. Bulletin of Economic Research, 65, 154–177.
Ardagna, S. (2009) “Financial markets' behavior around episodes of large changes in the fiscal stance”. European Economic Review, 53, 37–55.
Arestis, P., P.O. Demetriades and K.B. Luintel (2001) “Financial Development and Economic Growth: The Role of Stock Markets”. Journal of Money, Credit and Banking, 33, 16-41.
Beck, T. and R. Levine (2004) “Stock Markets, Banks and Growth: Panel Evidence”. Journal of Banking and Finance, 28, 423–42.
Bernanke, B.S. and K.N. Kuttner (2005) “What explains the stock market's reaction to Federal Reserve policy?”. The Journal of finance, 60, 1221-1257.
Bhargava, A. (1986) “On the theory of testing for unit roots in observed time series”. Review of Economic Studies, 53, 369-384.
Bjørnland, H.C. and K. Leitemo (2009) “Identifying the interdependence between US monetary policy and the stock market”. Journal of Monetary Economics, 56, 275-282.
Calvo, G. and C. Reinhart (2002) “Fear of floating”. The Quarterly Journal of Economics, 117, 379-408.
Christiano, L., M. Eichenbaum and C. Evans (1999) “Monetary policy shocks: What have we learned and to what end” in Handbook of macroeconomics by J.B. Taylor and M. Woodford, Eds., Elsevier: New York.
Danaasuren, V. (2015) “Capital Market Development in Mongolia”. The Northeast Asian Economic Review, 3, 17-27.
El-Wassal, K.A. (2013) “The Development of Stock Markets: In Search of a Theory”. International Journal of Economics and Financial Issues, 3, 606-624.
Foresti, P. and O. Napolitano (2017) “On the stock market reactions to fiscal policies”. International Journal of Finance & Economics, 22, 296-303.
Gill, I. and H. Kharas (2007) An East Asian Renaissance, IBRD and World Bank: Washington, D.C..
Ioannidis, C. and A. Kontonikas (2008) “The impact of monetary policy on stock prices”. Journal of policy modeling, 30, 33-53.
King, R. and R. Levine (1993) “Finance and Growth: Schumpeter Might Be Right”. The Quarterly Journal of Economics, 108, 717–37.
Levine, R. (2005) “Finance and Growth: Theory and Evidence” in Handbook of Economic Growth by P. Aghion and S. Durlauf, Eds., Elsevier: New York.
Levine, R. and S. Zervos (1998) “Stock Markets, Banks, and Economic Growth”. The American Economic Review, 88, 537-558.
Levine, R., N. Loayza and T. Beck (2000) “Finance and the Sources of Growth”. Journal of Financial Economics, 58, 261–300.
McKinnon, R. (1973). Money and Capital in Economic Development, The Brookings Institution: Washington.
Ng, S. and P. Perron (2001) “Lag length selection and the construction of unit root tests with good size and power”. Econometrica, 69, 1519-1554.
Phillips, P. and P. Perron (1988) “Testing for unit root in time series regression”. Biometrika, 74, 335-346.
Rajan, R.G. and L. Zingales (1998) “Financial Dependence and Growth”. American Economic Review, 88, 559-586.
Sahay, R., M. Čihák, P. N’Diaye, A. Barajas, R. Bi, D. Ayala, Y. Gao, A. Kyobe, L. Nguyen, C. Saborowski, K. Svirydzenka, and S.R. Yousefi (2015) “Rethinking Financial Deepening: Stability and Growth in Emerging Markets”. IMF Staff Discussion Note SDN/15/08.
Shaw, E. (1973) Financial Deepening in Economic Development, Oxford University Press: New York.
Svirydzenka, K. (2016) “Introducing a New Broad-based Index of Financial Development”. IMF Working Paper WP/16/5.
Taguchi, H. and E. Khishigjargal (2018) “Monetary Policy Rule under Inflation Targeting in Mongolia”. East Asian Economic Review, 22, forthcoming.