Do Tightening Cycles Amplify the Negative Effect of VIX Shocks on U.S. Bank Stock Returns?

Monetary Policy Tightening, and Banking Concentration: Structural Evidence from an Emerging Economy

This paper analyses the short-run dynamic relationship between monetary policy and banking market structure in Colombia during a period of post-pandemic inflation and aggressive policy tightening. Using monthly credit portfolio data for 2017–2024, we compute several concentration indicators (the Herfindahl–Hirschman Index (HHI), CRk ratios, and a dominance index) and employ three complementary identification strategies to evaluate the causal effect of monetary policy innovations on banking concentration. First, a structural VAR model identified through sign restrictions finds that contractionary shocks are associated with a short-run increase in banking concentration (median peak response: +0.60 HHI points at h = 3; 90% credible set: [+0.12, +1.16]), contrasting with the negative short-run response obtained under recursive reduced-form identification. Second, an extended VAR including credit portfolio growth as a mechanism variable confirms that contractionary shocks compress aggregate lending but do not generate robust, persistent changes in concentration. Third, local projections with regime-interaction terms formally test the nonlinear mechanisms discussed in the literature and find evidence of state-dependent transmission: the concentration response is larger in the low-inflation regime and attenuates during high-inflation episodes. All estimated effects are transitory and horizon-sensitive, reinforcing a cautious interpretation. The paper contributes new evidence from an emerging economy on the structural consequences of monetary policy and highlights the importance of identification assumptions in determining the direction of this effect.

The Impact of Monetary Policy Shocks on Stock Price Crash Risk

This study examines the impact of monetary policy shocks (MPS) on future stock price crash risk (SPCR), using a sample of US firms from 1995 to 2019. We find that expansionary MPS significantly reduce the likelihood of SPCR, while contractionary MPS show no statistically significant effect on SPCR. These results remain robust after controlling for omitted variable bias, reverse causality concern, selection bias, varying forecasting windows, and incorporating different industry definitions. Furthermore, we find that expansionary MPS prevent the accumulation of bad news by curbing aggressive accrual and real earnings management (REM). We also provide evidence for two non–earnings–management‐based channels, where expansionary shocks alleviate external financing constraints and improve investment efficiency. The relation between expansionary MPS and SPCR is more pronounced among firms with better governance monitoring, lower ex‐ante risk, less information asymmetry, greater financial constraints, higher product market competition, and greater stock return sensitivity to MPS. Overall, our findings highlight the important role of macroeconomic policy uncertainty in shaping corporate financial disclosure.

Asymmetric Effects of Exchange Rate Fluctuations on Stock Market Transaction Value: A NARDL Approach

This study employs a Nonlinear Autoregressive Distributed Lag (NARDL) model to examine the asymmetric effects of exchange rate fluctuations on the value of transactions in the Tehran Stock Exchange. The data used in this research are quarterly observations spanning the period 2002 to 2024, collected from the Tehran Stock Exchange and the World Bank databases. In this study, exchange rate fluctuations are decomposed into positive and negative shocks, while the price-to-dividend ratio (P/D) and nominal per capita GDP are incorporated into the model as control variables. The results indicate the existence of a long-run equilibrium relationship, whereby positive exchange rate shocks significantly increase transaction value, whereas negative shocks do not exert a significant effect. The Wald test confirms the presence of long-run asymmetry. These findings highlight the asymmetric behavior of the capital market in response to currency fluctuations and underscore the necessity of adopting targeted policies to improve capital market management during periods of heightened volatility and uncertainty, as well as implementing stability-enhancing measures.

Time-Varying Effects of Monetary Policy on House Prices in China: Evidence from 2008 to 2025 with the TVP-VAR Approach

Abstract This paper investigates the dynamic and nonlinear effects of monetary policy on house prices in China from 2008 to 2025. Utilizing a Bayesian Time-Varying Parameter Vector Autoregression (TVPVAR) model with stochastic volatility, we estimate the evolution of policy transmission in terms of shock magnitude and time-lag. By conducting 20,000 MCMC simulations, the study identifies significant structural shifts in the transmission mechanism. The results show that while the stimulative effect of targeted housing credit expansion was dominant during the 2009 and 2016 cycles, its marginal effectiveness has diminished toward historical lows in the 2023–2025 period. Simultaneously, the inhibitory effect of interest rate hikes has become increasingly shallow, suggesting severe balance sheet constraints and weak expectations in the current housing market rather than a classic “liquidity trap.” The inclusion of stochastic volatility underscores the role of market uncertainty in dampening the efficiency of traditional policy instruments.

Working Paper Series

MONETARY POLICY SHOCKS AND CRYPTOCURRENCY RETURNS: EVIDENCE FROM A STRUCTURAL VAR-X ANALYSIS

This study examines the short-run effects of U.S. monetary policy shocks on cryptocurrency returns and asks whether digital assets respond to conventional macroeconomic transmission mechanisms. Focusing on the post-2020 period, it evaluates the magnitude, direction, and persistence of Federal Reserve rate shocks across Bitcoin, Ethereum, Solana, Ripple, and TRON. The analysis applies an SVAR-X framework to daily data for January 2020-December 2025. Cryptocurrency log returns are treated as endogenous variables, while the U.S. Dollar Index and VIX are included as exogenous controls; federal funds rate changes are modelled as strictly exogenous policy shocks. Impulse-response results show positive and significant contemporaneous responses for Bitcoin, Ethereum, Solana, and TRON, but no significant reaction for XRP. These effects dissipate within days, indicating modest, short-lived, and heterogeneous monetary-policy transmission rather than persistent effects on cryptocurrency return dynamics over time.