The Stock Market and Macroeconomic Variables in a BRICS Country and Policy Implications

Authors

  • Yu Hsing Department of Management & Business Administration, College of Business, Southeastern Louisiana University, U.S.A. Phone: 985-549-2086, E-mail: yhsing@selu.edu

Abstract

This paper examines the effects of selected macroeconomic variables on the stock market index in South Africa. The exponential GARCH (Nelson, 1991) model is applied. It finds that South Africa’s stock market index is positively influenced by the growth rate of real GDP, the ratio of the money supply to GDP and the U.S. stock market index and negatively affected by the ratio of the government deficit to GDP, the domestic real interest rate, the nominal effective exchange rate, the domestic inflation rate, and the U.S. government bond yield. Therefore, to maintain a robust stock market, the authorities are expected to pursue economic growth, fiscal prudence, a higher ratio of the money supply to GDP, a lower real interest rate, depreciation of the rand, and/or a lower inflation rate.

Keywords: Stock market; Monetary policy; Fiscal policy; Interest rates; Exchange rates; Inflation

JEL Classifications: E44; G15

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How to Cite

Hsing, Y. (2011). The Stock Market and Macroeconomic Variables in a BRICS Country and Policy Implications. International Journal of Economics and Financial Issues, 1(1), 12–18. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/2

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