THE IMPACT OF MONETARY POLICY ON STOCK MARKET PERFORMANCE IN NINE ASEAN COUNTRIES: THE MODERATING ROLE OF INSTITUTIONAL QUALITY
DOI:
https://doi.org/10.33736/uraf.11098.2025Keywords:
Monetary Policy, Stock Market Performance, Institutional Quality, ASEAN CountriesAbstract
This study examines the impact of monetary policy on stock market performance in nine ASEAN countries, while also investigating the moderating role of institutional quality. Monetary policy variables, such as interest rates, gross domestic product, and inflation rates, are analysed to determine their influence on stock market returns. Recognising the growing importance of governance and institutional frameworks in shaping economic outcomes, this study incorporates institutional quality as a moderator to assess how it strengthens or weakens the effect of monetary policy on the stock market. Using panel data from 2015 to 2023, the study employs econometric techniques including descriptive analysis, Pearson’s correlation, multiple regression analysis, fixed and random effects models, and diagnostic tests to ensure robustness. Specifically, stronger institutional environments amplify the negative impact of rising interest rates on stock market performance, indicating heightened market sensitivity to policy changes. Additionally, institutional quality enhances the positive effect of GDP and reduces the influence of inflation on stock returns. These findings underscore the critical role of institutional strength in shaping the effectiveness of macroeconomic policy on financial markets, offering valuable insights for policymakers and investors in emerging economies.
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