Open AccessImpact of Macro-Economic Variable on Pakistan Stock Exchange KSE-100 Index
Author(s) -
Muhammad Faisal Hassan,
Hashim Jusoh,
Salman Ali Khan,
Fahad Ali Khan,
Muhammad Akram Naseem,
Imran Khan
Publication year - 2021
Publication title -
the journal of management theory and practice
Language(s) - English
Resource type - Journals
ISSN - 2716-7089
DOI - 10.37231/jmtp.2020.2.3.171
Subject(s) - econometrics , exchange rate , variance decomposition of forecast errors , inflation (cosmology) , economics , ordinary least squares , index (typography) , statistics , interest rate , collinearity , mathematics , granger causality , error correction model , variables , cointegration , monetary economics , computer science , physics , theoretical physics , world wide web
The researcher investigates the Impact of inflation, exchange rate and interest rate on Pakistan stock Exchange performance KSE-100 index by using monthly time series data which covers the period of 2013 to 2020. The econometrics techniques which are employed includes ADF test, Ordinary Least squares regression Model, testing for Multi-collinearity, Residual analysis serial correlation, testing for co-integration, Error correction model (ECM), variance decomposition (VAR) and Pair wise granger causality test. The results indicate that there is positive impact of exchange rate on PSX 100 index and the impact of inflation and interest rate is fond negative but inflation have insignificant relationship with PSX 100 index and the other two relationships are found significant. From the ECM result it is found that in short run 20% of the variation in dependent variable is due to inflation, exchange rate and interest rate and 80% variation is unexplained in short run. Form the results of VAR test it is concluded that exchange rate 1.67, inflation 14.25%, and interest rate 3.90% variation cause in PSX 100 index performance due to these three independent variables.