Effects of Macroeconomic Variables on the Stock Market: The Case of the Czech Republic

Yu Hsing
Additional contact information
Yu Hsing: Southeastern Louisiana University, USA

Theoretical and Applied Economics, 2011, vol. XVIII(2011), issue 7(560), 54-64

Abstract: Applying the GARCH model, this paper finds that the Czech stock market index is positively associated with real GDP and the German and US stock market indexes, is negatively influenced by the ratio of government borrowing to GDP, the domestic real interest rate, the CZK/USD exchange rate, the expected inflation rate and the euro area government bond yield, and exhibits a quadratic relationship with the ratio of M2 to GDP. It suggests that the Czech stock market index and the M2/GDP ratio have a positive (negative) relationship if the M2/GDP ratio is less (greater) than the critical value of 60.0%. Hence, to promote a robust stock market, the authorities are expected to pursue or maintain economic growth, fiscal discipline, currency appreciation, a relatively low interest rate and expected inflation rate, and the M2/GDP ratio which is below the critical value of 60.0%.

Keywords: stock market index; government borrowing; money supply; interest rates; exchange rates; foreign stock markets. (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://store.ectap.ro/articole/612.pdf (application/pdf)
http://www.ectap.ro/articol.php?id=612&rid=76 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:7(560):y:2011:i:7(560):p:54-64

Access Statistics for this article

Theoretical and Applied Economics is currently edited by Mircea Dinu

More articles in Theoretical and Applied Economics from Asociatia Generala a Economistilor din Romania / Editura Economica Contact information at EDIRC.
Bibliographic data for series maintained by Mircea Dinu ().