How do banks' stock returns respond to monetary policy committee announcements in Turkey? Evidence from traditional versus new monetary policy episodes

Kucukkocaoglu G., Unalmis D., Ünalmış İ.

ECONOMIC MODELLING, vol.35, pp.536-545, 2013 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 35
  • Publication Date: 2013
  • Doi Number: 10.1016/j.econmod.2013.07.019
  • Journal Name: ECONOMIC MODELLING
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.536-545
  • Keywords: Monetary policy, Stock market, Banking system, Emerging markets, Identification through heteroscedasticity, IMPACT
  • TED University Affiliated: No

Abstract

Using a methodology that is robust to endogeneity and omitted variable problems, it is found that the stock returns of all banks that are listed in Borsa Istanbul (BIST) respond significantly to the monetary policy surprises on Monetary Policy Committee (MPC) meeting days prior to May 2010. It is also shown that stock returns of banks for which interest payments constitute an important share in their balance sheets respond more aggressively to the changes in policy rates. In addition, foreign banks and participation banks give relatively less responses to monetary policy surprises. Finally, the estimation results suggest that since the Central Bank of the Republic of Turkey has started adopting a new monetary policy framework in May2010, with various instruments and flexible timing, aggregate and individual bank indices have not responded significantly to the surprises on MPC meeting days. (C) 2013 Elsevier B.V. All rights reserved.