IDEAS home Printed from https://ideas.repec.org/a/rjr/romjef/vy2025i1p122-145.html
   My bibliography  Save this article

Comparative Analysis of Asymmetric Effects of Macroeconomic Indicators on Stock Indexes in Pakistan, India, and China: A Nonlinear Autoregressive Distributed Lag (NARDL) Approach

Author

Listed:
  • Saghir Pervaiz GHAURI

    (Faculty of Management & Economics, Jinnah University for Women, 5C, Block-5, Nazimabad, Karachi, Pakistan)

  • Rizwan Raheem AHMED

    (Faculty of Management Sciences, Indus University, Block-17, Gulshan, Karachi, Pakistan;)

  • Rohit RAMPAL

    (School of Business and Economics, State University of New York Plattsburgh, New York 12901, USA. & Thapar Institute of Engineering and Technology, Patiala, Punjab, 147004, India)

  • Dalia STREIMIKIENE

    (Lithuanian Sports University, Institute of Sports Science and Innovations, Sporto str. 6, Kaunas, Lithuania.)

  • Hina QADIR

    (Faculty of Management Sciences, Indus University, Block-17, Gulshan, Karachi, Pakistan;)

  • Muhammad AQIL

    (Faculty of Management Sciences, Shaheed Zulfikar Ali Bhutto Institute of Science & Technology, 100 Clifton, Block-5, Karachi – 75600, Sindh, Pakistan;)

  • Justas STREIMIKIS

    (Lithuanian Institute of Agrarian Economics, A. Vivulskio g. 4A-13, 03220 Vilnius, Lithuania; University of Economics and Human Science in Warsaw, Okopowa 59, 01-043 Warsaw, Poland,)

Abstract

This study examines the impacts of macroeconomic indicators, such as exchange rate, interest rate, money supply, and inflation, on the stock index of Pakistan (PSX), India (BSE), and China (SSE). The researchers have taken monthly data from Jul 2001 to March 2023 and employed a Nonlinear Autoregressive Distributed Lag (NARDL) approach to investigate the asymmetric effects of the variables. The Bound test result for the cointegration relationship demonstrated a long-run relationship (or cointegration) between LPSX, LSSE, and macroeconomic variables. However, no long-run relationship or Cointegration of LBSE and macroeconomic determinants exists. The findings of Asymmetric ARDL (NARDL) exhibited that the overall goodness of fit of LPSX, LBSE, and LSSE as the Adjusted R2 is 99.51%, 99.3%, and 94.3%, respectively, which means the exchange rate, interest rate, money supply, and inflation variables determine the changes in LPSX, LBSE, and LSSE. The findings of CUSUM and CUSUMSQ tests suggested that the overall model is stable for LPSX, LBSE, and LSSE. The findings of the asymmetric short and long coefficients of the NARDL model demonstrated a long and short-run relationship between LPSX and LSSE and macroeconomic indicators. However, in the case of LBSE, there is only a short-run relationship between LBSE and macroeconomic indicators. The findings provide essential implications for policymakers in Pakistan, India, and China to manage and sustainably develop the stock markets successfully.

Suggested Citation

  • Saghir Pervaiz GHAURI & Rizwan Raheem AHMED & Rohit RAMPAL & Dalia STREIMIKIENE & Hina QADIR & Muhammad AQIL & Justas STREIMIKIS, 2025. "Comparative Analysis of Asymmetric Effects of Macroeconomic Indicators on Stock Indexes in Pakistan, India, and China: A Nonlinear Autoregressive Distributed Lag (NARDL) Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 122-145, April.
    • Handle: RePEc:rjr:romjef:v::y:2025:i:1:p:122-145
    as

    Download full text from publisher

    File URL: https://www.ipe.ro/ftp/RePEc/rjef1_2025/rjef1_2025p122-145.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Akbar, Muhammad & Iqbal, Farhan & Noor, Farzana, 2019. "Bayesian analysis of dynamic linkages among gold price, stock prices, exchange rate and interest rate in Pakistan," Resources Policy, Elsevier, vol. 62(C), pages 154-164.
    3. Ovidiu Stoica & Anca Nucu & Delia-Elena Diaconasu, 2014. "Interest Rates and Stock Prices: Evidence from Central and Eastern European Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S4), pages 47-62.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Su, Chi-Wei & Pang, Lidong & Umar, Muhammad & Lobonţ, Oana-Ramona & Moldovan, Nicoleta-Claudia, 2022. "Does gold's hedging uncertainty aura fade away?," Resources Policy, Elsevier, vol. 77(C).
    2. Rossana, Robert J., 1988. "Interrelated Demands for Buffer Stocks and Productive Inputs: Estimates for Two-Digit Manufacturing Industries," Department of Economics and Business - Archive 259428, North Carolina State University, Department of Economics.
    3. Michel DIMOU & Alexandra SCHAFFAR & Zhihong CHEN & Shihe FU, 2008. "LA CROISSANCE URBAINE CHINOISE RECONSIDeReE," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 27, pages 109-131.
    4. Bosker, Maarten & Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2008. "A century of shocks: The evolution of the German city size distribution 1925-1999," Regional Science and Urban Economics, Elsevier, vol. 38(4), pages 330-347, July.
    5. Bierens, H.J. & Broersma, L., 1991. "The relation between unemployment and interest rate : some international evidence," Serie Research Memoranda 0112, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    6. Muhammad Zia Ullah Khan & Muhammad Illyas & Muqqadas Rahman & Chaudhary Abdul Rahman, 2015. "Money Monetization and Economic Growth in Pakistan," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(4), pages 184-192, April.
    7. Xu, Haifeng & Hamori, Shigeyuki, 2012. "Dynamic linkages of stock prices between the BRICs and the United States: Effects of the 2008–09 financial crisis," Journal of Asian Economics, Elsevier, vol. 23(4), pages 344-352.
    8. Guili Liao & Qimeng Liu & Rongmao Zhang & Shifang Zhang, 2022. "Rank test of unit‐root hypothesis with AR‐GARCH errors," Journal of Time Series Analysis, Wiley Blackwell, vol. 43(5), pages 695-719, September.
    9. Yap, Wei Yim & Lam, Jasmine S.L., 2006. "Competition dynamics between container ports in East Asia," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(1), pages 35-51, January.
    10. Carol Alexander & Anca Dimitriu, 2003. "Equity Indexing: Conitegration and Stock Price Dispersion: A Regime Switiching Approach to market Efficiency," ICMA Centre Discussion Papers in Finance icma-dp2003-02, Henley Business School, University of Reading.
    11. Xiaojie Xu, 2017. "The rolling causal structure between the Chinese stock index and futures," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 31(4), pages 491-509, November.
    12. Erasmia Kotroni & Dimitra Kaika & Efthimios Zervas, 2020. "Environmental Kuznets Curve in Greece in the period 1960-2014," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 364-370.
    13. Vincent Brémond & Emmanuel Hache & Tovonony Razafindrabe, 2016. "The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 13(1), pages 97-131, June.
    14. Ibrahim Ari & Muammer Koc, 2018. "Sustainable Financing for Sustainable Development: Understanding the Interrelations between Public Investment and Sovereign Debt," Sustainability, MDPI, vol. 10(11), pages 1-25, October.
    15. Shyh-Wei Chen, 2008. "Non-stationarity and Non-linearity in Stock Prices: Evidence from the OECD Countries," Economics Bulletin, AccessEcon, vol. 3(11), pages 1-11.
    16. Hartikainen, Johanna, 1995. "Dynamic effects of demand and supply disturbances on the Finnish economy: Did liberalization of capital movements matter?," Bank of Finland Research Discussion Papers 36/1995, Bank of Finland.
    17. Ely, David & Salehizadeh, Mehdi, 2001. "American depositary receipts: An analysis of international stock price movements," International Review of Financial Analysis, Elsevier, vol. 10(4), pages 343-363.
    18. repec:kap:iaecre:v:17:y:2011:i:2:p:157-168 is not listed on IDEAS
    19. Kazem Yavari & Mina Mehrnoosh, 2005. "The Welfare Cost of Inflation in Iran," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 10(2), pages 111-117, fall.
    20. Choi-Meng Leong & Chin-Hong Puah & Shazali Abu Mansor & Evan Lau, 2010. "Testing the Effectiveness of Monetary Policy in Malaysia Using Alternative Monetary Aggregation," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 4(3), pages 321-338, August.
    21. Andrés, Antonio R. & Halicioglu, Ferda, 2010. "Determinants of suicides in Denmark: Evidence from time series data," Health Policy, Elsevier, vol. 98(2-3), pages 263-269, December.

    More about this item

    Keywords

    Macroeconomic indicators; Stock markets; Nonlinear ARDL; Asymmetric effects; cointegration.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rjr:romjef:v::y:2025:i:1:p:122-145. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Corina Saman The email address of this maintainer does not seem to be valid anymore. Please ask Corina Saman to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/ipacaro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.