Comparative Analysis of Asymmetric Effects of Macroeconomic Indicators on Stock Indexes in Pakistan, India, and China: A Nonlinear Autoregressive Distributed Lag (NARDL) Approach

Saghir Pervaiz Ghauri (), Rizwan Raheem Ahmed (), Rohit Rampal, Dalia Streimikiene (), Hina Qadir (), Muhammad Aqil () and Justas Streimikis ()
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Saghir Pervaiz Ghauri: Faculty of Management & Economics, Jinnah University for Women, 5C, Block-5, Nazimabad, Karachi, Pakistan
Rizwan Raheem Ahmed: Faculty of Management Sciences, Indus University, Block-17, Gulshan, Karachi, Pakistan;
Rohit Rampal: School of Business and Economics, State University of New York Plattsburgh, New York 12901, USA. & Thapar Institute of Engineering and Technology, Patiala, Punjab, 147004, India
Dalia Streimikiene: Lithuanian Sports University, Institute of Sports Science and Innovations, Sporto str. 6, Kaunas, Lithuania.
Hina Qadir: Faculty of Management Sciences, Indus University, Block-17, Gulshan, Karachi, Pakistan;
Muhammad Aqil: Faculty of Management Sciences, Shaheed Zulfikar Ali Bhutto Institute of Science & Technology, 100 Clifton, Block-5, Karachi – 75600, Sindh, Pakistan;
Justas Streimikis: Lithuanian Institute of Agrarian Economics, A. Vivulskio g. 4A-13, 03220 Vilnius, Lithuania; University of Economics and Human Science in Warsaw, Okopowa 59, 01-043 Warsaw, Poland,

Journal for Economic Forecasting, 2025, issue 1, 122-145

Abstract: This study examines the impacts of macroeconomic indicators, such as exchange rate, interest rate, money supply, and inflation, on the stock index of Pakistan (PSX), India (BSE), and China (SSE). The researchers have taken monthly data from Jul 2001 to March 2023 and employed a Nonlinear Autoregressive Distributed Lag (NARDL) approach to investigate the asymmetric effects of the variables. The Bound test result for the cointegration relationship demonstrated a long-run relationship (or cointegration) between LPSX, LSSE, and macroeconomic variables. However, no long-run relationship or Cointegration of LBSE and macroeconomic determinants exists. The findings of Asymmetric ARDL (NARDL) exhibited that the overall goodness of fit of LPSX, LBSE, and LSSE as the Adjusted R2 is 99.51%, 99.3%, and 94.3%, respectively, which means the exchange rate, interest rate, money supply, and inflation variables determine the changes in LPSX, LBSE, and LSSE. The findings of CUSUM and CUSUMSQ tests suggested that the overall model is stable for LPSX, LBSE, and LSSE. The findings of the asymmetric short and long coefficients of the NARDL model demonstrated a long and short-run relationship between LPSX and LSSE and macroeconomic indicators. However, in the case of LBSE, there is only a short-run relationship between LBSE and macroeconomic indicators. The findings provide essential implications for policymakers in Pakistan, India, and China to manage and sustainably develop the stock markets successfully.

Keywords: Macroeconomic indicators; Stock markets; Nonlinear ARDL; Asymmetric effects; cointegration. (search for similar items in EconPapers)
JEL-codes: C32 E44 G15 (search for similar items in EconPapers)
Date: 2025
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