Abstract

Changes in the macroeconomic environment of many countries throughout the world have had a significant impact on stock market behaviour. Financial markets play a critical part in economic development in today's globe. Economic participants keep an eye on the economy as well as the stock markets. As a result, the study looked at the short- and long-term effects of macroeconomic variables on stock market performance on the Malawi Stock Exchange (MSE). As well as the causal relationship, that exists between stock market and macroeconomic variables including interest rate, money supply, government spending, gross domestic product (GDP), real effective exchange rate, and inflation. For a dataset spanning 1997q1 to 2013q4, I employed the Autoregressive Distributed Lag Model (ARDL). The estimated bounds test for cointegration demonstrates that the variables have a long-run relationship. Except for government spending in the short run, the ARDL short and long runs reveal that the variables are highly significant in influencing the stock market. Except for the exchange rate, the paper found no causality between stock prices and the variables studied. As a result, the government and policymakers must focus on maintaining price stability, and high economic growth. Because such growth benefits the stock market in the long-run.

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School	: School of Law, Economics and Government
Issued Date	: 2022

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