Relationship among stock markets and macro-economic variables A comparison between Pakistan and BRIC Countries
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Date
2018
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UMT, Lahore
Abstract
This study intends to investigate a relationship among stock market index, consumer price index (CPI), gross domestic product (GDP), foreign direct investment (FDI) and government texpenditure (GOVT.EXP) of “Pakistan and BRIC countries”. ‘co integration techniques’ have been applied on the tenure 1992-2016. Johansen co-integration for long- run and vector error correction model for short-run relationship have been implimented to find-out the relationship of mentioned variables. To find dependency of variables granger causality test has been used. The results observed by tests of co integration resolve that different countries depict different relationships in long-run and short-run. For example, both Pakistan and China have ‘4’ co integration equation for long run; while there is ‘5’ co integrating equations for Russia, and ‘3’ for India and ’01 for Brazil. Mean while vecm test depict that short rum relationship exists among Pakistan and bric countries. Likewise, results of granger causality test show that there is ‘causing variable’ in the selected period of study.
Findings of the study dictate that point of view of the policy makers may be different as the causing behavior of variables of the study.