Comparison of the impact of monetary policy (including different variables of monetary policy)

with stock market relationship in different countries is as follow:

Monetary Policy Researche Place Findings

tools (variables) r
Money supply, Ibrahim Malaysi Malaysian stock price index relates positively
consumer price index, M.H. a with money supply, consumer price index, and
industrial production (2003) industrial production, and negatively with the
and exchange rates movement of exchange rates.
Exchange rate, money Mukherjee Tokyo All the monetary variables used in the study
supply, industrial T.K. & showed a positive relationship with stock prices
production index, Naka A. except for inflation and interest rates, which
inflation and interest (1995) were observed to exhibit a mixed relationship.
rates
Inflation, exchange Coleman Ghana Lending rates from deposit money banks have
rate, lending rate, and A. & Stock an adverse effect on stock market performance
Treasury bill rate Agyire- Exchang and particularly serve as major hindrance to
Tettey K.F. e business growth. Inflation rate has a negative
(2008) effect on stock market performance, but that
there is the presence of a lag period; and that
investors benefit from exchange-rate losses as a
result of domestic currency depreciation.
Stock market liquidity, Zafar M. Pakistan There exist significant positive strong
FDI, real interest Rate (2013) relationship between stock market performance
and financial and foreign direct investment, negative
development moderate relationship between real interest rate
and stock market capitalization, positive
moderate relationship between value traded as
percentage of GDP and market capitalization as
percentage of GDP; while stock market has
weak positive relationship with financial
 intermediary development in Pakistan.

Conclusion of the article:

The empirical evidence defining the exact nature and strength of the relationship between the
two magnitudes stock market and monetary policy is unclear, and the results of several studies
done regarding to this has not helped particularly in measuring the extent to which a change in
one magnitude can affect the other. So in order to fill this void, the article “The impact of
monetary policy on stock market performance: Evidence from twelve (12) African countries
“undertakes a cross-country analysis of the bidirectional link between monetary policy and stock
market performance within the context of monetary and macroeconomic variables in Africa, and
seeks to find if there is contemporaneous relationship between the stock market performance and
monetary policy variables, if monetary policy respond to changes in stock market performance
and the effect of changes in monetary policy variables on the stock market performance.

This article takes a comprehensive look at the monetary policy and stock market dynamics from
the African perspective by using five indicators; SS&P global equity indices, Real interest rate,
Money and quasi; money growth, GDP growth rate and inflation rate with a panel VAR
framework. The Cross-sectional Dependence Test shows that all the series are cross-sectional
correlated and imply that the findings of the study will hold for all the countries in the sample
studied. The findings of this study shows that the stock markets of the 12 African countries are
positively affected contemporaneously by their respective monetary policies through the interest
rate channel, but could not find evidence to the reverse reaction. Apart from GDP, which seems
not to be significantly responding to the stock market shock, the rest of the variables are affected
by the stock market. The study establish that both money supply and real interest rate decline in
response to positive and negative stock market shocks respectively, whiles inflation responds
positively to a negative stock market shock.

In case of the two monetary policy stances considered in the study (money supply and real
interest rate), real interest rate is found to have the greatest influence on the stock market and
inflation. Contrarily, the stock market in turn exerts greater influence on real interest rate than it
does on money supply; this indicates a reverse relationship between monetary policy and the
stock market. Although both money supply and real interest rate affect inflation rate, the
influence of the real interest rate is much greater. Inflation is also seen to affects money supply
positively. A bidirectional relationship between inflation and stock market is also found,
implying inflation is an important determinant of stock market movements . These findings from
the article are enough evidence to conclude that there is a bidirectional relationship between
monetary policy and stock market performance in Africa.