Dynamic Relation Between Economic Growth, Stock Market Depth and Macroeconomic Variables of Bangladesh
This study explores the dynamic relation between economic growth and stock market depth in the presence of three more macroeconomic indicators such as exchange rate, inflation and interest rate of Bangladesh. We use Johansen and Juselius (1990) test of co-integration and Vector Error Correction M...
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| Format: | Article |
| Language: | English |
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Ala-Too International University
2020-11-01
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| Series: | Eurasian Journal of Business and Economics |
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| Online Access: | https://ejbe.org/EJBE2020Vol13No26p045-ALI.pdf |
| Summary: | This study explores the dynamic relation between economic growth and stock market
depth in the presence of three more macroeconomic indicators such as exchange
rate, inflation and interest rate of Bangladesh. We use Johansen and Juselius (1990)
test of co-integration and Vector Error Correction Model (VECM) to detect the
possible short-run and long-run causal relation among the selected economic forces.
The results of the study evidence that the lagged error-correct term of GDP (i.e., the
proxy of economic growth) is found statistically significant in all three models. This
manifest that GDP tends to converge to its long-run equilibrium path in response to
changes in its regressors. But we find a complex network of causal linkage between
the variables in the short-run. The findings of this study are of particular interest and
importance to policymakers, financial managers, financial analysts and investors
dealing with the Bangladesh economy and the Bangladesh stock market.
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| ISSN: | 1694-5948 1694-5972 |