Macro-Economic Variables and Their Impact on Stock Exchange: A Study of Pakistan (KSE 100 Index)

  • Waqar Badshah MS-Finance Scholar, Anadolu University, Eskiehir, Turkey.
  • Shoaib Irshad PhD-Finance Scholar, Middle East Technical University, Ankara, Turkey
  • Özlem SAYILIR Asst Professor, Business Administration, Anadolu University, Eskisehir, Turkey
Keywords: Macro-Economic Variables, Karachi Stock Exchange( KSE 100), Consumer Price Index(CPI), Foreign Exchange Rate(FX), Interest Rate(INT).

Abstract

This study examines the relationship between the Karachi stock exchange and macro-economic variables. Monthly data for the time period July 2005 to April 2014 has been considered. CPI, FX, GDP, INT, Gold prices and oil prices in Pakistan are chosen as the macroeconomic variables. Unit root tests, Johansen and Juselius 1990 Cointegration, long & Short term granger causality under VECM framework along with the Sims 1980 variance decomposition and Pulse impulse response function has been employed. The analysis suggest that there is the long run cointegration among the variables and KSE and all the variables granger cause the KSE 100 index in the long run whereas in short run only forex granger cause KSE. An interesting finding is the significant explanation of variance in KSE 100 Index by the oil prices in Pakistan and the adverse response of the KSE on the one standard deviation shock to the oil prices.

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Published
2016-04-16
How to Cite
Badshah, W., Irshad, S., & SAYILIR, Özlem. (2016). Macro-Economic Variables and Their Impact on Stock Exchange: A Study of Pakistan (KSE 100 Index). Journal of Research in Business, Economics and Management, 5(5), 704-716. Retrieved from http://scitecresearch.com/journals/index.php/jrbem/article/view/708
Issue
Vol 5 No 5: JRBEM
Section
Articles

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