COLOMBIAN EQUITY RETURN AND NARROW MONEY SUPPLY: AN ASYMMETRIC COINTEGRATION ANALYSIS
The asymmetric, cointegrating relationship between the return on equity market and the narrowly defined money supply is documented. In fact, equity return and the monthly percentage change in the Colombian money supply M1 spread adjusts to the threshold value slower when a contractionary countercyclical policy action or an economic shock causes the money supply M1 to fall relative to the share price index, widening their spread, than when an expansionary countercyclical monetary policy action or a shock causes money supply M1 to move in the opposite direction, narrowing their spread. The empirical findings further indicate the impact lag on the Colombian monetary policy in the equity market is two years. These empirical findings should be of interest to both domestic and international investors who are interested in the Colombian equity market. The results also reveal the presence of both the neoclassical and the post-Keynesian positions on the relationship between equity return and money supply M1Key words: Asymmetry; return on equity market; money supply M1 ; TAR model; Colombia.
in the Colombian financial market. In the age of globalization, these findings may provide a better understanding of the impact of the countercyclical monetary policy on the equity market in Latin American economies.
Fundación Universitaria Konrad Lorenz - Escuela de Negocios