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Dynamic Relationship between the Stock Market and the Macroeconomic Factors: Preliminary Evidence from Nepalese Stock Market

Economic Journal of Nepal

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Title Dynamic Relationship between the Stock Market and the Macroeconomic Factors: Preliminary Evidence from Nepalese Stock Market
 
Creator Bhattarai, Rama Chandra; Department of Economics, Patan Multiple Campus (Lalitpur), Tribhuvan University
Joshi, Navan Krishna; Tribhuvan University and Finance Analyst at
Employees Provident Fund
 
Subject Economics
Stock market; Money supply; Interest rate; Nepal
Sstock market
 
Description This paper examines the dynamic relationship between the stock market and macroeconomic factors represented by inflation, money supply and interest rate for a stock market of a single small developing country such as Nepal. Using Johansen and Juselius (1990) method of multivariate cointegration for the period of July 1995 to June 2006. the study documented both short run and long run interdependence between stock index and some macroeconomic variables. Regarding stock index and consumer price index the multivariate results suggested long run relationship and positive and unidirectional (short run) relationship from consumer price index to stock index. The multivariate results uncovered long run relationship between stock index and Treasury bill rate but no short run linkages. The variance decompositions results showed a strong relative exogeneity of stock while the impulse response graphs showed that the response of stock index to shocks in macroeconomic variables did not persist for long period.Key words: Stock market; Money supply; Interest rate; NepalEconomic Journal of Nepal A Quarterly Publication of the Central Department of Economics, Tribhuvan University, Kirtipur, KathmanduVol. 30, No.4, October-December, Issue No. 120, 2007Page: 215-231Uploaded date: 22 July, 2011
 
Publisher Central Department of Economics Tribhuvan University
 
Contributor —
 
Date 2011-07-26
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Identifier https://www.nepjol.info/index.php/EJON/article/view/5148
 
Source Economic Journal of Nepal; Vol 30, No 4 (2007); 215-231
 
Language en
 
Coverage Nepal
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