 Interaction among stock prices and monetary variables in PakistanGhulam Abbas and David G. McMillan International Journal of Monetary Economics and Finance, 2014, vol. 7, issue 1, 13-27 Abstract: The interaction between stock market and monetary variables in Pakistan using monthly data for the last 20 years is examined. The Johansen co-integration approach is utilised to examine the equilibrium relationship between the stock price index, money supply, interest rates and a foreign exchange rate. An unrestricted VAR model is also used in order to analyse short-run dynamics and causality within these variables. The results report a long-run and significant relationship between these variables. In particular, the VAR model indicates that fluctuations in the KSE-100 index are significantly affected by the money supply and exchange rate but not the interest rate. Moreover, money supply has a positive relationship with the stock market and a negative relationship with interest rates and exchange rates. Interest rates have a weak and mixed relationship with all other variables. The dynamic relationships should aid policy-makers in understanding the effects of monetary policy changes. Keywords: money supply; interest rates; KSE-100 index; foreign exchange rates; VAR; vector autoregressive; Pakistan; stock prices; monetary variables; stock markets; Johansen co-integration; monetary policy. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:7:y:2014:i:1:p:13-27 Access Statistics for this article More articles in International Journal of Monetary Economics and Finance from Inderscience Enterprises Ltd |
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