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The Stock Market and Macroeconomic Variables in a BRICS Country and Policy Implications

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  • Yu Hsing

    (Southeastern Louisiana University, USA)

Abstract

This paper examines the effects of selected macroeconomic variables on the stock market index in South Africa. The exponential GARCH (Nelson, 1991) model is applied. It finds that South Africa's stock market index is positively influenced by the growth rate of real GDP, the ratio of the money supply to GDP and the U.S. stock market index and negatively affected by the ratio of the government deficit to GDP, the domestic real interest rate, the nominal effective exchange rate, the domestic inflation rate, and the U.S. government bond yield. Therefore, to maintain a robust stock market, the authorities are expected to pursue economic growth, fiscal prudence, a higher ratio of the money supply to GDP, a lower real interest rate, depreciation of the rand, and/or a lower inflation rate.

Suggested Citation

  • Yu Hsing, 2011. "The Stock Market and Macroeconomic Variables in a BRICS Country and Policy Implications," International Journal of Economics and Financial Issues, Econjournals, vol. 1(1), pages 12-18.
    • Handle: RePEc:eco:journ1:2011-01-2
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    More about this item

    Keywords

    Stock market; monetary policy; fiscal policy; interest rates; exchange rates; inflation.;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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