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Macroeconomic Factors and Stock Market Movement: Evidence from Ghana

Anokye Adam and George Tweneboah ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the role of macroeconomic variables on stock prices movement in Ghana. We use the Databank stock index to represent Ghana stock market and (a) inward foreign direct investments, (b) the treasury bill rate (as a measure of interest rates), (c) the consumer price index (as a measure of inflation), and (d) the exchange rate as macroeconomic variables. We analyze both long-run and short-run dynamic relationships between the stock market index and the economic variable with quarterly data for the above variables from 1991.1 to 2006.4 using Johansen's multivariate cointegration test and innovation accounting techniques. We established that there is cointegration between macroeconomic variables identified and Stock prices in Ghana indicating long run relationship. Results of Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) indicate that interest rate and Foreign Direct Investment (FDI) are the key determinants of the share price movements in Ghana.

Keywords: Cointegration; Innovation Accounting; Foreign Direct Investment (FDI) (search for similar items in EconPapers)
JEL-codes: C22 E44 G10 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-mac and nep-rmg
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https://mpra.ub.uni-muenchen.de/11256/1/MPRA_paper_11256.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/13699/1/MPRA_paper_13699.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/14079/2/MPRA_paper_14079.pdf revised version (application/pdf)

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