Impact of Macro-Economic Variable on Pakistan Stock Exchange KSE-100 Index

  • Muhammad Faisal Hassan Faculty of Business & Management, UniSZA, Gong Badak, Kuala Terengganu, Malaysia
  • Hashim Bin Jusoh Faculty of Business & Management, UniSZA, Gong Badak, Kuala Terengganu, Malaysia
  • Sajjad Khan Faculty of Business & Management, UniSZA, Gong Badak, Kuala Terengganu, Malaysia
  • Fahad Ali Khan Faculty of Business & Management, UniSZA, Gong Badak, Kuala Terengganu, Malaysia
  • Muhammad Naseem Faculty of Business & Management, UniSZA, Gong Badak, Kuala Terengganu, Malaysia
  • Imran Ali Khan Northern Univerisity, Nowshera Pakistan
Keywords: Macro-economic Variable, ECM, VAR, ADF and PSX

Abstract

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.

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Published
2021-11-13
How to Cite
Hassan, M. F., Hashim Bin Jusoh, Sajjad Khan, Fahad Ali Khan, Muhammad Naseem, & Imran Ali Khan. (2021). Impact of Macro-Economic Variable on Pakistan Stock Exchange KSE-100 Index. The Journal of Management Theory and Practice (JMTP), 2(3), 17-23. https://doi.org/10.37231/jmtp.2020.2.3.171