2011 Fiscal Year Final Research Report
Financial Market Volatility, Monetary Policy and Economic Fluctuations
| Project/Area Number |
21330077
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| Research Category |
Grant-in-Aid for Scientific Research (B)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Wakayama University |
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Principal Investigator |
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| Co-Investigator(Kenkyū-buntansha) |
NISHINA Kazuhiko 明治学院大学, 経済学部, 教授 (30094311)
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| Co-Investigator(Renkei-kenkyūsha) |
J. HOLMES Mark Waikato University, NEW ZEALAND, Waikato Management School, Professor
KIM Moo sung Pusan National University, KOREA, College of Business Administration, Professor
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| Project Period (FY) |
2009 – 2011
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| Keywords | 金融市場変動性 / Model-free implied volatility index / 金融政策 / 経済変動 / ボラティリティ指標 / International financial markets |
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| Research Abstract |
This research program focuses on the formation of volatility expectations in financial markets, their behaviour around monetary policy meetings, and the interdependencies between market volatility and the real economy. The main empirical results indicate that the model-free implied volatility index constitutes an important measure of financial instability and economic uncertainty. The usefulness of CSFI-VXJ volatility index disseminated by the Center for the Study of Finance and Insurance, Osaka University is also reflected by references in articles from The Nikkei newspaper and The Economist magazine. In addition to evidence on nonlinearities in the formation of volatility expectations, it is shown that policy announcements may have stabilizing effects on financial markets by dissipating pre-meeting excessive volatility. Also, shocks to volatility expectations may be transmitted into the leading diffusion index of the Japanese economy, which is indicative of turning points in the business cycle, through a deterioration of consumer confidence, decrease in the investment climate index and flattening of the term structure of interest rates. On aggregate, these results shed some light on the complex relations between economic uncertainty, financial market volatility, and economic information.
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