Title: Financial development and asset price reaction to monetary policy: case study of Thailand

Authors: Attasuda Lerskullawat

Addresses: Department of Economics, Faculty of Economics, Kasetsart University, 50 Ngam Wong Wan Rd., Lat Yao, Chatuchak, Bangkok 10900, Thailand

Abstract: Recent studies in many countries have examined the reaction of asset prices to monetary policy; however, few have investigated the effect of financial development on this reaction, including in the case of Thailand. This paper aims to examine asset price reaction to monetary policy and the effect of financial development, including banking sector and capital market development, on this reaction in Thailand from January 2007 to December 2018. The paper also analyses these reactions in different industrial sectors. The results show that asset prices have a significant negative reaction to monetary policy, while financial sector development leads to a higher reaction. This reaction is especially high in industry groups which have relatively low returns. The study raises a policy implication for Thailand and other countries in the use of financial development to control asset price reaction and the economy.

Keywords: asset price reaction; monetary policy; asset price channel; financial development; banking sector development; capital market development; Thailand.

DOI: 10.1504/IJEPEE.2023.136310

International Journal of Economic Policy in Emerging Economies, 2023 Vol.18 No.3/4, pp.269 - 282

Received: 14 Oct 2020
Accepted: 09 Mar 2021
Published online: 30 Jan 2024 *

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