Impact of Some Selected Macroeconomic Variables (Money Supply and Deposit Interest Rate) on Share Prices: A Study of Dhaka Stock Exchange (DSE)
International Journal of Business and Economics Research
Volume 5, Issue 6, December 2016, Pages: 202-209
Received: Jul. 21, 2016; Accepted: Jul. 30, 2016; Published: Nov. 23, 2016
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Author
Md. Nazmul Haque, Department of Business Administration, Atish Dipankar University of Science and Technology, Dhaka, Bangladesh
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Abstract
This paper tries to investigate the long-run relationship and the short-run dynamics between Bangladesh stock market index (DSE General Index) and some selected macroeconomic variables such as Broad money supply (M2) and Deposit Interest rate (DIR). This study analyses monthly data for the above variables between the periods spanning from January 2009 to June 2015 and employ different econometric tools. The Johansen multivariate co-integration tests indicate that the Bangladesh stock market index (DSE General Index) and chosen two macroeconomic variables are co-integrated, this is indicative of a long-run relationship. It shows the speed of adjustment of any disequilibrium towards long run equilibrium state. The speed of adjustment is 10.7816 percent. Cointegration analysis, along with the VECM, suggests that deposit interest rate is negatively related to stock prices, and money supply (M2) is positively related to stock prices in the long-run. This study also finds short-run causal relationship. It is found that only Deposit Interest Rate has short run influence on DSE General Index. R-squared of the VECM is 0.291900 that is 29.1900 percent. It means that all of the independent variables can explain 29.1900 percent of the total variations of the dependent variable. The residuals of the regression model have serial correlation, but they are homoscedastic and normally distributed.
Keywords
Macroeconomic Variables, DSE General Index, DIR, M2, Cointegration, VECM
To cite this article
Md. Nazmul Haque, Impact of Some Selected Macroeconomic Variables (Money Supply and Deposit Interest Rate) on Share Prices: A Study of Dhaka Stock Exchange (DSE), International Journal of Business and Economics Research. Vol. 5, No. 6, 2016, pp. 202-209. doi: 10.11648/j.ijber.20160506.13
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Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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