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Testing the Relationship between Interest Rates Volatility and Market Capitalization: the case of Mauritius

Journal of Economics and Business Research

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Title Testing the Relationship between Interest Rates Volatility and Market Capitalization: the case of Mauritius
 
Creator Okoro, Edesiri Godsday
 
Description This paper tests the relationship between interest rates volatility and market capitalization in Mauritius. Using annual time series data sourced from the Financial Services Commission Annual Statistical Bulletin of Mauritius during the period 2006 through 2010, data of interest rates volatility and market capitalization were estimated in a non-linear model using the Vector Auto-regression technique. The study found that interest rates volatility has significant effect on the level of market capitalization although a negative effect. This implies a negative relationship between interest rates volatility and market capitalization. Thus, if market capitalization is affected by interest rates, then the economy becomes highly susceptible to volatile external distress. This indicates some dangers for the economic survival of Mauritius. It was on this note that we recommended an effective policy aimed at stabilizing macroeconomic variable like interest rates, focusing at the same time on alternative measures of promoting market capitalization if aggregate economic growth must be harnessed. Policymakers should design the optimal policy mix that would help the nation cope efficiently with the economic and social costs of the external distress accompanying higher and dwindling interest rates in Mauritius.
 
Publisher Journal of Economics and Business Research
 
Contributor —
 
Date 2014-11-25
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.uav.ro/jour/index.php/jebr/article/view/379
 
Source Journal of Economics and Business Research; Vol 20, No 2 (2014): J of Economics & Business Research; 137 - 148
2069-9476
2068-3537
 
Language eng
 
Relation http://www.uav.ro/jour/index.php/jebr/article/view/379/pdf_144