Asymmetric Monetary Policy Transmission and Bank Equity Resilience: Evidence from Stress Testing in Turbulent Emerging Markets

This study develops an integrated empirical framework to analyze the asymmetric effects of monetary policy on bank equity returns in Tunisia; a frontier market characterized by institutional fragility and repeated crises. Existing literature often overlooks the critical interplay between asymmetric transmission and the predictive power of equity markets in stress tests. We address this gap by combining a Panel Nonlinear Autoregressive Distributed Lag model with Generalized Impulse Response Functions and scenario-based stress testing, using monthly data from twelve listed banks over the 2002–2022 periods. The results reveal a pronounced asymmetry: contractionary monetary shocks significantly depress bank equity returns, with the negative impact on private banks being markedly more severe than on statebacked public banks. In contrast, expansionary policies yield only muted benefits. Furthermore, crisis-specific analyses demonstrate that the origin of a shock dictates the market response; financial crises amplify losses, political instability induces volatility, and health-related shocks see their impact mitigated by policy interventions. These findings necessitate a paradigm shift in regulatory approach. We conclude that policymakers in turbulent emerging markets must adopt asymmetric-aware monetary frameworks, implement ownership-specific macroprudential tools such as higher liquidity buffers for private banks, and crucially, integrate equity-based signals into dynamic stress-testing regimes to preemptively identify and address sector vulnerabilities.