## Monetary Policy and the Price Behavior in Emerging Stock Markets

_IMF Working Papers, March 1, 1991_

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**Canonical URL:** [Monetary Policy and the Price Behavior in Emerging Stock Markets](https://www.imf.org/en/publications/wp/issues/2016/12/30/monetary-policy-and-the-price-behavior-in-emerging-stock-markets-904)

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## Bibliographic details
- Authors: Peter Cornelius
- Published: March 1, 1991
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451844429.001

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### Objective
- Examine whether the six largest and most active emerging stock markets are informationally efficient with respect to changes in the money supply.
- Investigate whether stock prices fully reflect the information contained in money supply changes.

### Methodology
- Two econometric techniques employed:
  - Direct Granger-causality tests to focus on the short-run relationship between stock prices and money.
  - Co-integration tests to study the long-run behavior of stock prices and money supply.

### Main findings
- The results suggest that at least for two markets profitable trading rules can be developed to earn consistently higher-than-normal rates of return.
- Implied conclusion: informational inefficiencies with respect to money supply changes exist in some of the six largest and most active emerging stock markets.

### Analytical implications
- Short-run dynamics between money supply changes and stock prices assessed via Granger-causality tests provide evidence on the timing and direction of information flow.
- Long-run co-integration analysis assesses whether stock prices and money supply share a stable equilibrium relationship over time, bearing on persistent predictability.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/monetary-policy-and-the-price-behavior-in-emerging-stock-markets-904_