Central Bank’s Announcements Effects on the Romanian Market

Abstract:

This study examines the effects of domestic monetary policy rate change announcements made by the central bank on the stock market returns and volatility in Romania. By utilizing event study methodologies under the Market Model, the analysis captures stock price reactions to these announcements in the period spanning from 2003 to 2023, therefore catching multiple phases of the financial cycle and of the business cycle, as well as multiple important events that marked the economy, including the 2008 crisis and the COVID-19 pandemic. By analysing Romania, this study adds to the economic research concerning the impact of monetary policy decisions, which has predominantly focused on the developed economies until now, remaining scarce on the developing ones. Furthermore, this research enhances the application of event study techniques in emerging markets.