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Is There a Relationship between Macroeconomic Variables and Stock Market Indices in Bosnia and Herzegovina?

Author

Listed:
  • Abdić Adem

    (Department of Finance, School of Economics and Business, University of Sarajevo, Sarajevo, Bosnia and Herzegovina)

  • Abdić Ademir

    (Department of Quantitative Economics, School of Economics and Business, University of Sarajevo, Sarajevo, Bosnia and Herzegovina)

  • Lazović-Pita Lejla

    (Department of Finance, School of Economics and Business, University of Sarajevo, Sarajevo, Bosnia and Herzegovina)

  • Kanlić Fahir

    (Agency for Statistics of Bosnia and Herzegovina, Sarajevo, Bosnia and Herzegovina)

Abstract

The economic growth and development of a country are reflected in many aspects, one of them being the stock market indices. The purpose of the article is to examine and determine the relationship between selected macroeconomic variables and stock market indices in Bosnia and Herzegovina (BiH). Using quarterly data over the 2010q1-2019q4 period, a cointegration analysis was applied to model this relationship. The Vector Error Correction Model (VECM) was used to explore the short-run relationship as well as the long-run relationship. The article examined the predictive ability among variables of interest by applying the Granger causality test. The results indicate a stable long-run relationship between the analysed macroeconomic variables and stock market indices in BiH, while no short-run relationship was found. The results contribute to the scientific discussions about the relationship between selected macroeconomic variables and representative stock market indices in BiH which considers their direction and strength.

Suggested Citation

  • Abdić Adem & Abdić Ademir & Lazović-Pita Lejla & Kanlić Fahir, 2024. "Is There a Relationship between Macroeconomic Variables and Stock Market Indices in Bosnia and Herzegovina?," Naše gospodarstvo/Our economy, Sciendo, vol. 70(3), pages 48-70.
    • Handle: RePEc:vrs:ngooec:v:70:y:2024:i:3:p:48-70:n:1004
    DOI: 10.2478/ngoe-2024-0016
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    References listed on IDEAS

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    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
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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