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Cointegration and Causality Between Macroeconomic Variables and Share Prices

Author

Listed:
  • Omer Yilmaz
  • Bener Gungor
  • Vedat Kaya

Abstract

The aim of this study is to investigate whether there is a relationship between some macroeconomic variables and share prices. In the analysis, covering the period of 1990: 01-2003: 12, variables of Istanbul Stock Exchange index, consumer price index, money supply, interest rate, exchange rate, trade balance, and industrial production index were used. Least squares estimation method, Johansen-Jeselius cointegration test, Granger causality test and variance decomposition results produced by VEC model were used in the study. These analysis shows that there is a long run relationship between some macroeconomic variables and share prices.

Suggested Citation

  • Omer Yilmaz & Bener Gungor & Vedat Kaya, 2007. "Cointegration and Causality Between Macroeconomic Variables and Share Prices," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 9(34), pages 1-16.
    • Handle: RePEc:bor:iserev:v:9:y:2007:i:34:p:1-16
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    File URL: http://www.borsaistanbul.com/datum/imkbdergi/EN/ISE_Review_34.pdf
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    References listed on IDEAS

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    1. Nikolina Kosteletou & Panagiotis Liargovas, 2000. "Foreign Direct Investment and Real Exchange Rate Interlinkages," Open Economies Review, Springer, vol. 11(2), pages 135-148, April.
    2. Goldberg, Linda S & Kolstad, Charles D, 1995. "Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 855-873, November.
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