Theoretical and Applied Economics
No. 7 / 2011 (560)
Effects of Macroeconomic Variables on the Stock Market: The Case of the Czech Republic
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%.
Keywords: stock market index; government borrowing; money supply; interest rates; exchange rates; foreign stock markets.
Contents
- Characteristics of Criteria for Selecting Investment Projects under Uncertainty
Dan ARMEANU
Adrian ENCIU
Dorina POANTA
- Online Services Management Support
for an Intelligent Locality
Lorena BĂTĂGAN
Adrian POCOVNICU
- The Meanings of “Made in Romania”
among the Romanian Consumers
Cătălin Mihail BARBU
- Forms and Strategies of the Banks to Enter on a Foreign Market
Nicoleta HURDUC
Alin NIŢU
- The European Recovery Economic Plan and Quality
of Public Finances – Instruments for Monitoring
and Improving Fiscal and Economic Systems
Mircea SOROCEANU
Carolina Daniela LUPAŞCU (SOROCEANU)
- An Optimization of the Risk Management
using Derivatives
Ovidiu ŞONTEA
Ion STANCU
- Towards to the Respiritualization
of the Economics
Constantin POPESCU
Mihaela COMĂNESCU
- Financial Crisis from the Trust and Loss Aversion
Perspective in Emerging Romanian Capital Market
Antoniade-Ciprian ALEXANDRU
Nicoleta CARAGEA
- The Contribution of the Neo-Schumpeterian Approach
to the Development of the Economic Theory:
Emphasis on the Meso-Economic Level
Radu HERMAN
Remus AVRAM
- Dobrogea as Romanian Tourism Micro-destination
Aurelia-Felicia STĂNCIOIU
Nicolae TEODORESCU
Anca-Daniela VLĂDOI
Ion PÂRGARU
Daniel MOISE