Investigating the Relationship between Monetary Policy and Stock Prices
DOI:
https://doi.org/10.26821/IJSRC.12.7.2024.120701Keywords:
monetary policy, interest rates, stock prices, regression analysisAbstract
This research paper investigates the effect of interest rate changes on stock prices, focusing on the contrasting impacts in developing and developed countries. Utilizing regression analysis, the study examines data from five developing countries and five developed countries. The results reveal a significant inverse relationship between interest rates and stock prices. These findings underscore the heightened sensitivity of developing markets to monetary policy adjustments, attributed to factors such as lower market liquidity, higher dependence on foreign capital and weaker financial infrastructure. Conversely, developed markets demonstrate greater resilience and stability due to more robust financial systems and higher investor sophistication. This study contributes to the existing literature by highlighting the necessity of context-specific policy approaches and provides crucial insights for policymakers and investors navigating the complex interplay between interest rates and stock market dynamics in diverse economic environments.
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