The Effect of Unanticipated Changes in Money and Real Activity on Stock Prices

Abstract

This paper analyzes empirically the effect of unanticipated changes in money and changes in real activity on stock prices for the Asian Newly Industrialized Economies. The money supply equation is employed to estimate both anticipated and unanticipated components of money. Unlike the experience in the industrialized countries, the unanticipated money supply has an inconsistent impact on stock prices in these four Asian markets. Moreover, The results show that, except for South Korea. future real activity dominates money growth rate in explaining real stock returns.