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Selected Macroeconomic Variables and Stock Market Movements: Empirical evidence from Thailand

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  • Forson, Joseph Ato
  • Janrattanagul, Jakkaphong

Abstract

This paper investigates and analyzes the long-run equilibrium relationship between the Thai stock Exchange Index (SETI) and selected macroeconomic variables using monthly time series data that cover a 20-year period from January 1990 to December 2009. The following macroeconomic variables are included in our analysis: money supply (MS), the consumer price index (CPI), interest rate (IR) and the industrial production index (IP) (as a proxy for GDP). Our findings prove that the SET Index and the selected macroeconomic variables are cointegrated at I (1) and have a significant equilibrium relationship over the long run. Money supply demonstrates a strong positive relationship with the SET Index over the long run, whereas the industrial production index and consumer price index show negative long-run relationships with the SET Index. Furthermore, in non-equilibrium situations, the error correction mechanism suggests that the consumer price index, industrial production index and money supply each contribute in some way to restore equilibrium.In addition, using Toda and Yamamoto’s augmented Granger causality test,we identify a bi-causal relationship between industrial production and money supply and unilateral causal relationships between CPI and IR, IP and CPI, MS and CPI, and IP and SETI, indicating that all of these variables are sensitive to Thai stock market movements. The policy implications of these findings are also discussed.

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  • Forson, Joseph Ato & Janrattanagul, Jakkaphong, 2014. "Selected Macroeconomic Variables and Stock Market Movements: Empirical evidence from Thailand," MPRA Paper 57582, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:57582
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    2. Adeel Ahmad DAR & Taj MUHAMMAD & M. Wasif SIDDIQI, 2020. "Bureaucratic Quality and FDI Inflows Nexus: A South Asian Perspective," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 149-168, September.
    3. Mazhar Hallak Kantakji, 2019. "The Impact of Macroeconomic Factors on US Islamic and Conventional Equity تأثير العوامل الاقتصادية الكلية على الأسهم الإسلامية والتقليدية الأمريكية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 32(2), pages 43-58, January.
    4. Nguyen, Trang & Chaiechi, Taha & Eagle, Lynne & Low, David, 2020. "Dynamic transmissions between main stock markets and SME stock markets: Evidence from tropical economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 308-324.
    5. Joseph Forson, 2015. "Corruption, EU Aid Inflows and Economic Growth in Ghana: Cointegration and Causality Analysis," Managing Intellectual Capital and Innovation for Sustainable and Inclusive Society: Managing Intellectual Capital and Innovation; Proceedings of the MakeLearn and TIIM Joint International Conference 2,, ToKnowPress.
    6. Seyed Alireza Athari & Dervis Kirikkaleli & Tomiwa Sunday Adebayo, 2023. "World pandemic uncertainty and German stock market: evidence from Markov regime-switching and Fourier based approaches," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(2), pages 1923-1936, April.
    7. Baah-Ennumh, Theresa Yaaba & Forson, Joseph Ato, 2015. "The Impact of Artisanal Small-Scale Mining on Sustainable Livelihoods: A Case Study of Mining Communities in the Tarkwa-Nsuaem Municipality of Ghana," MPRA Paper 102491, University Library of Munich, Germany, revised 15 Sep 2016.
    8. Muhammad Ali Nasir & Muhammad Shahbaz & Trinh Thi Mai & Moade Shubita, 2021. "Development of Vietnamese stock market: Influence of domestic macroeconomic environment and regional markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1435-1458, January.
    9. Joseph Ato Forson & Ponlapat Buracom & Theresa Yaaba Baah-Ennumh & Guojin Chen & Emmanuel Carsamer, 2015. "Corruption, EU Aid Inflows and Economic Growth in Ghana: Cointegration and Causality Analysis," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(3), September.

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    More about this item

    Keywords

    Macroeconomic Variables; Cointegration; Thai Stock Exchange Index (SETI); T-Y Augmented Granger-Causality;
    All these keywords.

    JEL classification:

    • C0 - Mathematical and Quantitative Methods - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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