Do financial markets react to emerging economies’ asset purchase program? Evidence from the COVID-19 pandemic period

We employ the daily data on bond yield, stock return, and exchange rate to explore their reaction to the large-scale asset purchase program for 8 emerging market economies during the COVID-19 pandemic period. Using event study analysis, we find that: (1) out of 8 emerging economies, 6 economies’ financial markets react to the asset purchase announcements. (2) Most economies witnessed a rise in stock return, and a fall in the yield rate. (3) 2 economies witnessed currency appreciation, while 3 economies experience currency depreciation. Overall, the asset purchase announcements have a mixed effect on the stock, bond, and foreign exchange markets. Hence, these should be included in the central bank’s toolbox as complementary instruments applied to address certain unprecedented economic circumstances.