Bank stock returns under money supply endogeneity: Empirical evidence using panel data

Zatul E. Badarudin, Mohamed Ariff, Ahmed Khalid

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

Abstract

There is as yet a study of money supply effect on the aggregate bank stock prices using modern money supply theories.Endogenous money theory suggests loans made by banks cause deposits, and, consequently, bank creates money supply. Resulting changes in bank’s loans and deposits affects bank stock returns: Also, consequent credit creations/reductions affect a bank’s profitability, thus stock prices. Whether money endogeneity is in fact the way the money supply behaves has also not yet been widely tested. Applying panel regression and generalized method of moments, this paper provides new evidence on this little explored relationship between endogenous money supply theory and bank stock returns by testing across several major economies (G-7 countries). We do this by controlling for the actual monetary policy regimes in the economies. The results, while confirming the money endogeneity as a proposition, also shows significant money supply effect on the aggregate prices of banking shares.
Original languageEnglish
Title of host publicationProceedings of The 22nd Australasian Finance and Banking Conference 2009
Place of PublicationRochester, New York
PublisherSocial Science Research Network (SSRN)
Pages1-54
Number of pages54
DOIs
Publication statusPublished - 2009
EventThe Australasian Finance and Banking Conference - Sydney, Australia
Duration: 16 Dec 200918 Dec 2009
Conference number: 22nd
https://www.business.unsw.edu.au/about/schools/banking-finance/seminars-conferences/australasian-finance-banking-conference

Conference

ConferenceThe Australasian Finance and Banking Conference
Abbreviated titleAFBC
CountryAustralia
CitySydney
Period16/12/0918/12/09
Internet address

Fingerprint

Money supply
Panel data
Stock returns
Empirical evidence
Endogeneity
Stock prices
Endogenous money
Money creation
Panel regression
Monetary policy regimes
Loans
Bank deposits
Generalized method of moments
Testing
Banking
G-7 countries
Bank loans
Deposits
Bank profitability

Cite this

Badarudin, Z. E., Ariff, M., & Khalid, A. (2009). Bank stock returns under money supply endogeneity: Empirical evidence using panel data. In Proceedings of The 22nd Australasian Finance and Banking Conference 2009 (pp. 1-54). Rochester, New York: Social Science Research Network (SSRN) . https://doi.org/10.2139/ssrn.1476164
Badarudin, Zatul E. ; Ariff, Mohamed ; Khalid, Ahmed. / Bank stock returns under money supply endogeneity : Empirical evidence using panel data. Proceedings of The 22nd Australasian Finance and Banking Conference 2009. Rochester, New York : Social Science Research Network (SSRN) , 2009. pp. 1-54
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Badarudin, ZE, Ariff, M & Khalid, A 2009, Bank stock returns under money supply endogeneity: Empirical evidence using panel data. in Proceedings of The 22nd Australasian Finance and Banking Conference 2009. Social Science Research Network (SSRN) , Rochester, New York, pp. 1-54, The Australasian Finance and Banking Conference, Sydney, Australia, 16/12/09. https://doi.org/10.2139/ssrn.1476164

Bank stock returns under money supply endogeneity : Empirical evidence using panel data. / Badarudin, Zatul E.; Ariff, Mohamed; Khalid, Ahmed.

Proceedings of The 22nd Australasian Finance and Banking Conference 2009. Rochester, New York : Social Science Research Network (SSRN) , 2009. p. 1-54.

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

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Badarudin ZE, Ariff M, Khalid A. Bank stock returns under money supply endogeneity: Empirical evidence using panel data. In Proceedings of The 22nd Australasian Finance and Banking Conference 2009. Rochester, New York: Social Science Research Network (SSRN) . 2009. p. 1-54 https://doi.org/10.2139/ssrn.1476164