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Dynamic linkage between Macroeconomic Activities and Stock Prices in Fiji

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  • Puah, Chin-Hong
  • Jayaraman, T. K.

Abstract

This paper seeks to investigate whether there is any causal relationship between capital stock prices and macroeconomic activities in Fiji. Empirical results show that all the time series data are nonstationary and cointegrated with a single vector. All the explanatory variables have been found to contribute to the long-run equilibrium relationship. The estimation of error-correction model further confirms that stock price index is cointegrated with real economic activities in the long run, and it adjusts rather fast from short-run deviations towards the long-run equilibrium level. Except for interest rate, real output, M2 and exchange rate do Granger cause stock prices in the short-run.

Suggested Citation

  • Puah, Chin-Hong & Jayaraman, T. K., 2007. "Dynamic linkage between Macroeconomic Activities and Stock Prices in Fiji," MPRA Paper 37671, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:37671
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    File URL: https://mpra.ub.uni-muenchen.de/37671/1/MPRA_paper_37671.pdf
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    References listed on IDEAS

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    7. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
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    10. Tarun K. Mukherjee & Atsuyuki Naka, 1995. "Dynamic Relations Between Macroeconomic Variables And The Japanese Stock Market: An Application Of A Vector Error Correction Model," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 18(2), pages 223-237, June.
    11. Mukherjee, Tarun K & Naka, Atsuyuki, 1995. "Dynamic Relations between Macroeconomic Variables and the Japanese Stock Market: An Application of a Vector Error Correction Model," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 18(2), pages 223-237, Summer.
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    Cited by:

    1. Tang, Maggie May-Jean, 2016. "A Review of the Literature on Monetary Neutrality," MPRA Paper 70113, University Library of Munich, Germany.

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    More about this item

    Keywords

    Error-correction model; stock market; Fiji;
    All these keywords.

    JEL classification:

    • O56 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Oceania
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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