The impact of United States monetary policy uncertainty on the Gulf Cooperation Council stock markets

  • Received October 31, 2018;
    Accepted February 7, 2019;
    Published February 25, 2019
  • Author(s)
    Abdullah Saeed S Alqahtani , Hongbing Ouyang , Shayem Saleh
  • DOI
    http://dx.doi.org/10.21511/imfi.16(1).2019.10
  • Article Info
    Volume 16 2019, Issue #1, pp. 128-143
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  • Cited by
    2 articles
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  • 106 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Most of the GCC countries currencies are pegged to the US dollar, which make the economy those countries susceptible to the US monetary policy change. This paper used the non-structural VAR tests to examine the spillovers impact of the two recently developed US monetary policy uncertainty indices (the BBD MPU and the HRS MPU) shocks on GCC stock markets from 2003: M01 to 2017: M07. The result revealed that during the period under review, the two MPU have slight significant impact on some GCC markets. But the HRS MPU has more impact than the BBD MPU. Besides this, unidirectional causality running from HRS MPU to Bahraini and Kuwaiti Stock market was detected within the period. Hence, policymakers should realize the heterogeneity impacts from US MPU to stock markets in GCC countries. The findings also help investors and portfolio managers to better understand the effects of US monetary policy uncertainty on the stock markets.

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    • Figure 1. Individual stock traded from 1/1/2003 to 1/7/2017
    • Figure 2. Monthly trend of all 6 stock markets of GCC from 1/1/2003 to 1/7/2017
    • Figure 3. Monthly trend of all 6 stock markets of GCC from 1/1/2003 to 1/7/2017
    • Figure 4. Impulse Response Function with Cholesky decomposition
    • Figure 5. Residual test at one standard deviation
    • Table 1. Signs
    • Table 2. The VAR result
    • Table A1. Time series properties of the variables
    • Table A2. The lag length criteria (initial lag length of 4)
    • Table A3. The AR root test
    • Table A4. Block exogeneity test
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Investment Management and Financial Innovations