Analyzing the Dynamics between Macroeconomic Variables and the Macedonian Stock Market Index
Date Issued
2024-12
Author(s)
Hristovski, Goran
DOI
10.47063/EBTSF.2024.0029
Abstract
This paper presents an empirical analysis of the dynamic relationships between the
Macedonian Stock Exchange Index and a set of macroeconomic variables including Gross
Domestic Product (GDP), central bank bills interest rate, interest rates on deposits, inflation,
and crude oil prices. Utilizing the Autoregressive Distributed Lag (ARDL) approach, we
examine the short-term and long-term impacts of these variables on the stock market from Q1
2009 to Q3 2023. Our ARDL Bounds Test results confirm the presence of a cointegrated
relationship, indicating that the stock market and macroeconomic variables are mutually
influenced over the long term. In the long run, increases in GDP positively impact the
Macedonian stock exchange market, while rising central bank interest rates exert a negative
effect on the MBI10 index. While, in the short term, only changes in oil prices and the stock
index itself are found to have significant impacts on the MBI-10, with the error correction term
indicating a swift adjustment to equilibrium after short-term shocks. This study contributes to
the literature by providing nuanced insights into the macroeconomic determinants of stock
market performance in North Macedonia, offering implications for policymakers and investors
regarding the critical factors influencing market dynamics. The findings underscore the
importance of economic growth for stock market vitality, the critical role of monetary policy,
and the sensitivity of the stock market to oil price volatility, emphasizing the need for strategic
economic policies to foster a stable and growth-conducive market environment.
Macedonian Stock Exchange Index and a set of macroeconomic variables including Gross
Domestic Product (GDP), central bank bills interest rate, interest rates on deposits, inflation,
and crude oil prices. Utilizing the Autoregressive Distributed Lag (ARDL) approach, we
examine the short-term and long-term impacts of these variables on the stock market from Q1
2009 to Q3 2023. Our ARDL Bounds Test results confirm the presence of a cointegrated
relationship, indicating that the stock market and macroeconomic variables are mutually
influenced over the long term. In the long run, increases in GDP positively impact the
Macedonian stock exchange market, while rising central bank interest rates exert a negative
effect on the MBI10 index. While, in the short term, only changes in oil prices and the stock
index itself are found to have significant impacts on the MBI-10, with the error correction term
indicating a swift adjustment to equilibrium after short-term shocks. This study contributes to
the literature by providing nuanced insights into the macroeconomic determinants of stock
market performance in North Macedonia, offering implications for policymakers and investors
regarding the critical factors influencing market dynamics. The findings underscore the
importance of economic growth for stock market vitality, the critical role of monetary policy,
and the sensitivity of the stock market to oil price volatility, emphasizing the need for strategic
economic policies to foster a stable and growth-conducive market environment.
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