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Effects of Macroeconomic Variables on the Stock Market: The Case of the Czech Republic

Author

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  • Yu HSING

    (Southeastern Louisiana University, USA)

Abstract

Applying the GARCH model, this paper finds that the Czech stock market index is positively associated with real GDP and the German and US stock market indexes, is negatively influenced by the ratio of government borrowing to GDP, the domestic real interest rate, the CZK/USD exchange rate, the expected inflation rate and the euro area government bond yield, and exhibits a quadratic relationship with the ratio of M2 to GDP. It suggests that the Czech stock market index and the M2/GDP ratio have a positive (negative) relationship if the M2/GDP ratio is less (greater) than the critical value of 60.0%. Hence, to promote a robust stock market, the authorities are expected to pursue or maintain economic growth, fiscal discipline, currency appreciation, a relatively low interest rate and expected inflation rate, and the M2/GDP ratio which is below the critical value of 60.0%.

Suggested Citation

  • Yu HSING, 2011. "Effects of Macroeconomic Variables on the Stock Market: The Case of the Czech Republic," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(7(560)), pages 54-64, July.
    • Handle: RePEc:agr:journl:v:7(560):y:2011:i:7(560):p:54-64
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    Citations

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    Cited by:

    1. Tihana ŠKRINJARIĆ & Lidija DEDI & Boško ŠEGO, 2021. "Return and Volatility Spillover between Stock Prices and Exchange Rates in Croatia: A Spillover Methodology Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 93-108, December.
    2. Saman, Corina, 2014. "Testing for nonlinearity of the relationship between stock prices and exchange rate in Romania," Working Papers of Institute for Economic Forecasting 141110, Institute for Economic Forecasting.
    3. Sugeng Wahyudi & H. Hersugondo & Rio Dhani Laksana & R. Rudy, 2017. "Macroeconomic Fundamental and Stock Price Index in Southeast Asia Countries: A Comparative Study," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 182-187.
    4. Godfrey Akileng & Eric Nzibonera & Micheal Mutegana, 2019. "The Influence of Foreign Exchange Volatility, Interest Rates on the Stock Performance of Uganda Securities Exchange," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 8(2), pages 1-1.
    5. Tihana Skrinjaric, 2014. "Investment Strategy on the Zagreb Stock Exchange Based on Dynamic DEA," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 16(1), pages 129-160, April.
    6. Ali Umar Ahmad & Adam Abdullah & Zunaidah Sulong & Ahmad Tijjani Abdullahi, 2015. "The Review of Stock Returns and Macroeconomic Variables," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(5), pages 154-181, May.
    7. Tomasz Schabek & Bojana Olgiæ Draženoviæ & Davor Mance, 2019. "Reaction of Zagreb Stock Exchange CROBEX Index to macroeconomic announcements within a high frequency time interval," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 741-758.
    8. Ibrahim Awad & Mohanad Rezeq & Abdelrahman Aliwisat, 2014. "The Impact of Macroeconomic Variables on Al-Quds Index: Empirical Evidence from Palestine," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 3(4), pages 228-241.
    9. Hubert Wisniewski, 2017. "Panelowa weryfikacja wplywu zmiennych makroekonomicznych na indeksy gieldowe," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 15(66), pages 162-177.
    10. Corina Saman, 2015. "Asymmetric Interaction between Stock Price Index and Exchange Rates: Empirical Evidence for Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 90-109, December.

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