Author(s)

Raksha Bissoon, Boopen Seetanah, Reena Bhattu-Babajee, Narvada Gopy-Ramdhany^*, Keshav Seetah

University of Mauritius, Moka, Mauritius.

This study investigates the impact of monetary policies on stock markets based on a sample of five open countries with growing stock market over the period 2004 to 2014. Using a random effect model for the panel regression coupled with a panel vector error correction model to study the short term and long term relationship between the variables, the findings reveal a negative relation between interest rate and stock return and a direct link between money supply and stock return. The results confirm that both in the short run and long run monetary variables explain changes in stock return.

Monetary Policy, Rate of Interest, Money Supply, Stock Return

Bissoon, R. , Seetanah, B. , Bhattu-Babajee, R. , Gopy-Ramdhany, N. and Seetah, K. (2016) Monetary Policy Impact on Stock Return: Evidence from Growing Stock Markets. Theoretical Economics Letters, 6, 1186-1195. doi: 10.4236/tel.2016.65112.