An Econometric Analysis of Linkages between Macroeconomic Variables and Stock Markets: Evidence from Asian Emerging Markets

GIS Business ◽  
2018 ◽  
Vol 13 (5) ◽  
pp. 21-30
Author(s):  
Risha Khandelwal
Keyword(s):  
Emerging Markets ◽  
Interest Rates ◽  
Stock Returns ◽  
Granger Causality ◽  
Stock Markets ◽  
Unit Root Test ◽  
Granger Causality Test ◽  
Causality Test ◽  
Macroeconomic Variables ◽  
Study Results

The purpose of this paper is to investigate impact of macroeconomic variables on stock markets of India and Indonesia. This paper also attempts to identify linkages between markets and macroeconomic variables. The rationale behind selecting these countries for the present study is MSCI emerging markets index of Asia, which comprises emerging economies with huge return potential for prospective investors. This study will help investors and researchers to understand dynamics of linkages between markets and macroeconomic variables. Augmented Dickey-Fuller (ADF) unit root test is used to assess the stationary of time series, Johansen test co-integration is applied to examine long-term integration among variables, Granger causality test is used to examine the causality relationship between macroeconomic variables and stock returns. The monthly data are taken for the study which ranges from July 1997 to July 2017. Currency exchange rates, interest rates, money supply, and inflation are the macroeconomic variables for the current study. Results revealed that there is one co-integrating equation of long-run equilibrium between the variables for both countries. Granger causality test reveals that there exists unidirectional and bidirectional relationship between the variables.

Do Macroeconomic Variables Impact the Indian Stock Market?

2016 ◽  
Vol 5 (3) ◽  
Author(s):  
Khalid Ul Islam ◽  
Mohsina Habib
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Stock Returns ◽  
Causal Relationship ◽  
Granger Causality ◽  
Oil Prices ◽  
Granger Causality Test ◽  
Causality Test ◽  
Macroeconomic Variables ◽  
Indian Stock Market

This paper is intended to study the impact of various macroeconomic variables on Indian stock market. Based on the Arbitrage Pricing Theory (APT) propounded by Ross in 1976 and various other studies, a number of macroeconomic variables including, inflation, industrial production, exchange rate, money supply, interest rate, and oil price have been identified to have a significant impact on the stock market. We have applied the multivariate extension of the classical linear regression model computed on Ordinary Least Squares method and Granger Causality test to re-establish the relationship between macroeconomic variables and stock returns over a period of 10 years from 2005 to 2015 using monthly observations. The results of this study show that only exchange rate has a significant negative impact on stock returns. The other macroeconomic variables are not significantly affecting stock returns, however, their impact is in accordance with the economic theory. The Granger Causality test reveals absence of any causal relationship between stock returns and macroeconomic variables, except in case of oil prices, where we find a unidirectional causal relationship running from stock returns to oil prices. However, the Granger Causality results should not be taken in the conventional meaning of causality, but results merely identifying precedence.

scholarly journals Dynamic linkage between nifty-fifty and sectorial indices of national stock exchange

2020 ◽  
Vol 3 (2) ◽  
pp. 17-27
Author(s):  
Kamaljit Singh ◽  
Vinod Kumar
Keyword(s):  
Causal Relationship ◽  
Granger Causality ◽  
Unit Root ◽  
Service Sector ◽  
Banking Sector ◽  
Stock Exchange ◽  
Unit Root Test ◽  
Granger Causality Test ◽  
Financial Service ◽  
Causality Test

The main objective of this paper is to analyze the trend and pattern of the Nifty-Fifty and sectorial indices. An attempt has been also made to find out the causal relationship among the Nifty-Fifty and NSE sectorial Indices. The unit root test and Granger-causality test has been applied to check the causal relationship between Nifty-Fifty and sectorial indices. The finding of the study shows that the financial service sector had performed better and followed by the banking sector among all the indices while the Pharma sector and the Realty sector were Under-performed in comparison to other indices. The Nifty-Fifty has been found less volatile in comparison to other sectorial indices however Realty sector indices show the highest volatility during the study period.

scholarly journals Linear and Nonlinear Causal Relationships Between International Reserves and Economic Growth: Evidence from India

2020 ◽  
Vol 16 (1) ◽  
pp. 54-59
Author(s):  
Mohammad Kashif ◽  
Satish Kumar Singh ◽  
S. Thiyagarajan ◽  
Abhishek Maheshwari
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Unit Root Test ◽  
Granger Causality Test ◽  
International Reserves ◽  
Infrastructure Development ◽  
Causal Relationships ◽  
Causality Test ◽  
Linear And Nonlinear ◽  
Bds Test

This study investigates linear and nonlinear causal relationships between accumulated international reserves (IR) and economic growth (Econ) in the case of India. The present study is carried out using quarterly data ranging from the period of the first quarter of 1985 to the fourth quarter of 2014. The study used econometric tools such as the augmented Dickey–Fuller (ADF) unit root test, the linear Granger causality test, Johansen’s cointegration test, the Brock, Dechert and Scheinkman (BDS) test and the nonlinear Granger causality test developed by Hiemstra and Jones. The study establishes that there exists a bidirectional linear causality. The Hiemstra and Jones test reveals a bidirectional nonlinear causal relationship between the variables. In light of these results, the study suggests that reserves accumulation can be implemented in India provided that excess of reserves are invested in alternative sources such as economic infrastructure projects and regional infrastructure development.

scholarly journals ANALISA HUBUNGAN ANTARA PRODUK DOMESTIK BRUTO DAN EKSPOR INDONESIA (UJI KAUSALITAS GRANGER)

2020 ◽  
Vol 3 (2) ◽  
pp. 299-305
Author(s):  
Debora Silvia Hutagalung ◽  
◽  
Junaidi Siahaan ◽  
Keyword(s):  
Gross Domestic Product ◽  
Granger Causality ◽  
Unit Root Test ◽  
Granger Causality Test ◽  
Domestic Product ◽  
Trade Theory ◽  
Causality Test ◽  
Macroeconomic Theory ◽  
The Relationship ◽  
Domestic Products

This study entitled "Analysis of The Relationship Between Gross Domestic Product and Indonesian Exports (Granger causality test)”. This research was conducted because of the dualism of the theory between the two variables. In macroeconomic theory, the relationship between Gross Domestic Product is one of the similarities, because exports contribute to Gross Domestic Products on the demand side, while neoclassical trade theory emphasizes causality related to household production and assistance for exports.The purpose of this study is to determine the relationship between Gross Domestic Product and exports. This study uses several analytical methods: Unit Root Test, CointegrationTest, Granger Causality Test using the E-views program7 and using Quarterly data.The results of the estimation of this study are the estimation of the relationship in GDP and exports, or in other words the Gross Domestic Product affects Indonesia's exports. This is concluded based on the estimation results that can be seen from the statistical F value that is greater than the f-table (8.958205> 3.841466) on the Null hypothesis. GDP is not an Export Granger with a 95% confidence level. This means, GDP affects exports When GDP can affect the level of exports in the intervals of 2000 to 2012.Keywords:Gross Domestic Product(GDP), Exports, Granger Causality Test

scholarly journals Linear and nonlinear linkage of conditional stochastic volatility of interbank interest rates: Empirical evidence of the BRICS countries

2021 ◽  
Vol 2 (2) ◽  
pp. 4-16
Author(s):  
Zouhaier Dhifaoui ◽  
Faicel Gasmi
Keyword(s):  
Time Series ◽  
Interest Rates ◽  
Stochastic Volatility ◽  
Causal Relationship ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Causality Test ◽  
Brics Countries ◽  
Volatility Model ◽  
Linear And Nonlinear

The purpose of this article is to detect a possible linear and nonlinear causal relationship between the conditional stochastic volatility of log return of interbank interest rates for the BRICS countries in the period from January 2015 to October 2018. To extract the volatility of the analyzed time series, we use a stochastic volatility model with moving average innovations. To test a causal relationship between the estimated stochastic volatilities, two steps are applied. First, we used the Granger causality test and a vector autoregressive model (VAR). Secondly, we applied the nonlinear Granger causality test to the raw data to explore a new nonlinear causal relationship between stochastic volatility time series, and also applied it to the residual of the VAR model to confirm the causality detected in the first step. This study demonstrates the existence of some unidirectional/bidirectional linear/nonlinear causal relationships between the studied stochastic volatility time series.

scholarly journals Modeling The Relationships Between Export, Import, Inflation, Interest Rate, and Rupiah Exchange

2020 ◽  
Vol 3 (3) ◽  
pp. 247-262
Author(s):  
Nina Valentika ◽  
Vivi Iswanti Nursyirwan ◽  
Ilmadi Ilmadi
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Short Term ◽  
Variable Model ◽  
Causality Test ◽  
Significance Level ◽  
Long Run

This research was a modification of research by Catalbas (2016) and Pratikto (2012). The model that can separate long-term and short-term components are the Vector Error Correction Model (VECM). This study aimed to model export, import, inflation, interest rates, and the rupiah exchange rate using VECM and to test the causality between variables using the Granger Causality test. The inter-variable model obtained in this study was VECM with lag 2 using a deterministic trend with the assumption of none intercept no trend and two cointegrations. In export and import, there was an adjustment mechanism from the short-term to the long-term. This research model was appropriate to forecast the export and import where VECM with export and import as the target variables, the cointegration equation (long-run model) for  cointegration equation (long-run model) for Based on the Granger Causality test, it was found that there was a one-way relationship between exchange rates and inflation, export and interest rates, export and import, inflation and export, and import and the interest rate at the significance level of 5%.

scholarly journals PENGUJIAN KAUSALITAS ANTARA VARIABEL MAKROEKONOMI DENGAN RETURN PASAR DI BURSA EFEK INDONESIA : SEBUAH PENDEKATAN VECTOR AUTO

Media Ekonomi ◽  
2017 ◽  
Vol 19 (3) ◽  
pp. 23
Author(s):  
Anggi Hapsari Nurullita
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Granger Causality ◽  
Unit Root ◽  
Unit Root Test ◽  
Granger Causality Test ◽  
Causality Test ◽  
Market Return ◽  
Vector Auto Regression ◽  
Auto Regression

<p>Indicators of macroeconomic have major impact on capital markets in general and stocks in particular. Influence of these indicators can be positive or negative. Vector Auto Regression (VAR) is a method of analysis used to predict the time series variable and analyze the dynamic impact factor interference in a system variable. VAR analysis is very useful to assess the linkages between economic variables. This research aims to see the influence of iIndicators of macroeconomic such as the exchange rate (EXCHANGE), interest rate Bank Central of Indonesia Certificates (SBI) and rate of inflation (INFLATION) to market return (REIHSG) in Indonesian Stock Exchange in the period 2004:1-2011:10. Data obtained from the Monthly Stock Price Index Statistics JSX. This research appllying several stages of testing as follows: unit root test, the optimal lag test, Granger causality test and Vector Auto Regression model (VAR). The results of unit root test in this study suggests that the data used for processing in the first degree and VAR Granger test because only the stationary stock index return variable in zero degree (level). On the test results suggested the optimal lag is the lag 3. On the Granger causality test is known that the Granger test variable rate (EXCHANGE) has a one-way impact or the exchange rate (EXCHANGE) affect market return (REIHSG) interest rate of Bank Central of Indonesia Certificates (SBI) and the rate of inflation (INFLATION) has a two direction or impact mutual Causality. These results indicate that there is a weak Granger causality between interest rates Bank Central of Indonesia Certificates (SBI) and rate of inflation (INFLATION) to market return (REIHSG).<br />Keywords: Vector Auto Regressive (VAR), Macroeconomic, Granger Causality, IHSG stock return</p>

scholarly journals ANALISIS KEBIJAKAN MONETER DALAM MENGENDALIKAN INFLASI DI INDONESIA

2012 ◽  
Vol 1 (2) ◽  
pp. 103
Author(s):  
Suriani Suriani
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Granger Causality ◽  
Unit Root Test ◽  
Good Choice ◽  
Causality Test ◽  
Long Run ◽  
Short Run

The objective of this research is to analize the effects of the variables interest rate, and exchange as one of monetary mecanisme for controlling inflation. The correlation among those variables is cointgration in the long run and short run equilibrium analyzed. In Indonesia, the monetary policy is run by monetary instruments (i.e. interest rates or monetary aggregates) to achieve price stability. This research used Unit Root Test , Cointegration Test, Granger causality and VECM (Vector Error Correction Model) Test. The results of estimation showed that have cointegration among interest rate, exchange rate and inflation in the long run. Granger causality test showed that between inflation and interest rate have no causality relationship, but for inflation and exchange rate have two directions relationship of causality. It’s means, monetary of mecanisme transmition through exchange rate channel can be good choice in making monetary policy to control inflation in Indonesia.

scholarly journals Evidence for Nonlinear Asymmetric Causality in US Inflation, Metal, and Stock Returns

2008 ◽  
Vol 2008 ◽  
pp. 1-7 ◽  
Author(s):  
D. Hristu-Varsakelis ◽  
C. Kyrtsou
Keyword(s):  
Stock Returns ◽  
Granger Causality ◽  
Discrete Time ◽  
Granger Causality Test ◽  
Causality Test ◽  
Glass Model ◽  
Causality Testing ◽  
Asymmetric Causality

The purpose of this paper is to propose a version of causality testing that focuses on how the sign of the returns affects the causality results. We replace the traditional VAR specification used in the Granger causality test by a discrete-time bivariate noisy Mackey glass model. Our test reveals interesting and previously unexplored relationships in US economic series, including inflation, metal, and stock returns.

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