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Symmetrical cointegrating relationship between money supply, interest rates, consumer price index, terroristic disruptions, and Karachi stock exchange: Does global financial crisis matter?

Cogent economics & finance, 2020, Vol.8 (1), p.1-24 [Peer Reviewed Journal]

2020 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. 2020 ;2020 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. This work is licensed under the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2332-2039 ;EISSN: 2332-2039 ;DOI: 10.1080/23322039.2020.1838689

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  • Title:
    Symmetrical cointegrating relationship between money supply, interest rates, consumer price index, terroristic disruptions, and Karachi stock exchange: Does global financial crisis matter?
  • Author: Sheikh, Umaid A ; Asad, Muzaffar ; Israr, Aqeel ; Tabash, Mosab I ; Ahmed, Zahid Shahab
  • McMillan, David
  • Subjects: ARDL with bound testing approach ; BDS test for non-linearity ; Change agents ; Consumer Price Index ; Economic crisis ; effect of terrorism on stock indexes ; global financial crisis and stock indexes ; Interest rates ; International economics ; macroeconomic volatility and stock indexes ; Macroeconomics ; Money supply ; Price indexes ; Recessions ; time series modelling ; Trading ; Variability
  • Is Part Of: Cogent economics & finance, 2020, Vol.8 (1), p.1-24
  • Description: The study is intended to investigate the symmetrical relationship between macroeconomic variability and KSE-100 indexes by employing the ARDL model with bound testing procedure and error correction model. Authors have also examined whether the linkages between macroeconomic variability and KSE-100 indexes change in the wake of the 2008 Global economic recession. Macroeconomic variability is represented by fluctuations in interest rates, consumer price index, and Money supply (M2). Monthly level data representing macroeconomic volatility has been incorporated from the trading economics website and validated from the Pakistan bureau of statistics. Four different types of unit root tests like augmented dickey fuller test, KPSS, and Philips Peron unit root are also employed for the identification of seasonality effects in data. To identify structural breaks and linearity in data, the Zivot Andrew unit root test and BDS test for nonlinearity have also been employed respectively. This study adds to the existing literature by classifying investor's different reactions to fluctuation in macroeconomic variability before and after the international economic recession. Our study results proposed that in the long run and before the international economic crunch, the money supply and interest rates have an inverse relationship with stock indexes but CPI has a direct and significant relationship. However, after the 2008 economic crisis and for a longer horizon, stock indexes have been impacted positively by money supply, and IR has formulated an inverse relationship with KSE-100 indexes. This indicated that the association between macroeconomic variations and KSE-100 indexes changes following the 2008 international economic crisis.
  • Publisher: Abingdon: Taylor & Francis
  • Language: English
  • Identifier: ISSN: 2332-2039
    EISSN: 2332-2039
    DOI: 10.1080/23322039.2020.1838689
  • Source: Open Access: DOAJ Directory of Open Access Journals
    AUTh Library subscriptions: ProQuest Central
    Coronavirus Research Database
    Taylor & Francis (Open access)
    ROAD: Directory of Open Access Scholarly Resources
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