The Dynamics of Korean Stock Market in Response to Fiscal and Monetary Shocks Around Foreign Currency Crisis and Stock Market Opening.
This paper investigates the effectiveness of economic policy on the stock market in Korea around foreign currency crisis and stock market opening. For this purpose, the paper applied SUR technique to a set of monthly data over the period 1982.01 to 2004.12. The study finds the following results. Fir...
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doaj-f1e464f1b9ba453a8a6400a32a3272ae2020-11-25T00:56:44ZengKorea Development InstituteKDI Journal of Economic Policy2586-29952586-41302005-12-0127220523710.23895/kdijep.2005.27.2.239The Dynamics of Korean Stock Market in Response to Fiscal and Monetary Shocks Around Foreign Currency Crisis and Stock Market Opening.Jeong, Jin ho0Associate Professor, School of Business Administration, Kyungnam University, KoreaThis paper investigates the effectiveness of economic policy on the stock market in Korea around foreign currency crisis and stock market opening. For this purpose, the paper applied SUR technique to a set of monthly data over the period 1982.01 to 2004.12. The study finds the following results. First, for the entire sample period, Korean stock market appears to have effectively incorporated all of the past information about fiscal policy moves. However, the paper finds an evidence that some of the past monetary actions have significant impacts upon current stock returns implying that the information about past monetary moves has been overlooked. Second, there is an evidence to suggest that, after foreign currency crisis, the macro economic policy actions may influence stock market in a different way. In particular, after foreign currency crisis, monetary policy influences stock market in a more delayed pattern while past fiscal policy moves are well incorporated into current stock returns. Third, before stock market opening to foreign investors, some of the past economic policy actions have significant effects on current stock returns. On the contrary, after stock market opening, none of the past macro economic information has significant impact upon current stock returns. The results imply that stock market opening may contribute to the active utilization of economic information for market participants in Korea.Monetary ShockFiscal ShockSURPolicy Effectiveness |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Jeong, Jin ho |
spellingShingle |
Jeong, Jin ho The Dynamics of Korean Stock Market in Response to Fiscal and Monetary Shocks Around Foreign Currency Crisis and Stock Market Opening. KDI Journal of Economic Policy Monetary Shock Fiscal Shock SUR Policy Effectiveness |
author_facet |
Jeong, Jin ho |
author_sort |
Jeong, Jin ho |
title |
The Dynamics of Korean Stock Market in Response to Fiscal and Monetary Shocks Around Foreign Currency Crisis and Stock Market Opening. |
title_short |
The Dynamics of Korean Stock Market in Response to Fiscal and Monetary Shocks Around Foreign Currency Crisis and Stock Market Opening. |
title_full |
The Dynamics of Korean Stock Market in Response to Fiscal and Monetary Shocks Around Foreign Currency Crisis and Stock Market Opening. |
title_fullStr |
The Dynamics of Korean Stock Market in Response to Fiscal and Monetary Shocks Around Foreign Currency Crisis and Stock Market Opening. |
title_full_unstemmed |
The Dynamics of Korean Stock Market in Response to Fiscal and Monetary Shocks Around Foreign Currency Crisis and Stock Market Opening. |
title_sort |
dynamics of korean stock market in response to fiscal and monetary shocks around foreign currency crisis and stock market opening. |
publisher |
Korea Development Institute |
series |
KDI Journal of Economic Policy |
issn |
2586-2995 2586-4130 |
publishDate |
2005-12-01 |
description |
This paper investigates the effectiveness of economic policy on the stock market in Korea around foreign currency crisis and stock market opening. For this purpose, the paper applied SUR technique to a set of monthly data over the period 1982.01 to 2004.12. The study finds the following results. First, for the entire sample period, Korean stock market appears to have effectively incorporated all of the past information about fiscal policy moves. However, the paper finds an evidence that some of the past monetary actions have significant impacts upon current stock returns implying that the information about past monetary moves has been overlooked. Second, there is an evidence to suggest that, after foreign currency crisis, the macro economic policy actions may influence stock market in a different way. In particular, after foreign currency crisis, monetary policy influences stock market in a more delayed pattern while past fiscal policy moves are well incorporated into current stock returns. Third, before stock market opening to foreign investors, some of the past economic policy actions have significant effects on current stock returns. On the contrary, after stock market opening, none of the past macro economic information has significant impact upon current stock returns. The results imply that stock market opening may contribute to the active utilization of economic information for market participants in Korea. |
topic |
Monetary Shock Fiscal Shock SUR Policy Effectiveness |
work_keys_str_mv |
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