Int. J. of Monetary Economics and Finance   »   2013 Vol.6, No.4

 

 

Title: The influence of global financial crisis on Jordanian equity market: VECM approach

 

Authors: Hussain Ali Bekhet; Ali Matar

 

Addresses:
Graduate Business School, College of Graduate Studies, Universiti Tenaga Nasional (UNITEN), 43000 Kajang-Selangor, Malaysia
Graduate Business School, College of Graduate Studies, Universiti Tenaga Nasional (UNITEN), 43000 Kajang-Selangor, Malaysia

 

Abstract: The current paper attempts to analyse the causality and co-integration relationship between the global financial crisis and the general stock price index (SPI) in the Jordanian equity market for the 1978-2011 period. A vector error correction model (VECM) is utilised to test the causal relationship between SPI and its determinants [gross domestic product (GDP), money supply (M2), exchange rate (EX) and consumer price index (CPI)]. The results identify a co-integration between SPI and Jordanian macroeconomic variables indicating a long-run equilibrium relationship among them. The error-correction term coefficient has a significant negative sign pointed to the adjustment back from short-run disequilibrium to the long-run equilibrium. The Granger causality test suggests a bidirectional causal relationship between SPI and M2 in the short and long runs. In addition, the results reveal that the global financial crisis has a positive significant impact on the SPI.

 

Keywords: VECM; vector error correction model; stock price index; SPI; Granger causality; global financial crisis; equity markets; Jordan; gross domestic product; GDP; money supply; exchange rate; consumer price index.

 

DOI: 10.1504/IJMEF.2013.059946

 

Int. J. of Monetary Economics and Finance, 2013 Vol.6, No.4, pp.285 - 301

 

Submission date: 17 Jul 2013
Date of acceptance: 26 Sep 2013
Available online: 21 Mar 2014

 

 

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