By Saghir Pervaiz GHAURI, Rizwan Raheem AHMED, Rohit RAMPAL, Dalia STREIMIKIENE, Hina QADIR, Muhammad AQIL and Justas STREIMIKIS
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
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
JEL codes: C32, E44, G15
DOI: ...