Stock prices and Macroeconomic Performance in Pakistan: An Analysis
DOI:
https://doi.org/10.26710/reads.v1i2.118Keywords:
Long run equilibrium Macroeconomic, time series models, Karachi stock exchange ,foreign exchange, asset pricingAbstract
This paper analyzes long-term equilibrium relationships between the
Karachi stock exchange index and a group of macroeconomic variables.
The macroeconomic variables are represented by the gross domestic
product, the consumer price index, M2 and the exchange rate. We employ a
multiple regression model to explore such relationships during 1991 to
2012. Our results indicated a "causal" relationship between the stock market
and the economy analysis of our results indicates that KSE 100 index has a
strong positive impact on GDP and M2 in Pakistan. Whereas it has a
negative and significant impact on CPI and exchange rate in Pakistan.
Granger causality test shows that KSE 100 index Granger causes GDP, CPI,
M2, EXRT, AGRI, FDI and BOT and the direction of causality runs from
KSE 100 index to these variables.
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