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International Journal of Academic Research in Economics and Management Sciences

Open Access Journal

ISSN: 2226-3624

Macroeconomic Indicators and Association in VECM Model: Case of Malaysia

Aung San Lwin, Jerome Kueh Swee Hui, Daw Tin Hla

http://dx.doi.org/10.6007/IJAREMS/v12-i3/18483

Open access

This research focuses the relationship between Kuala Lumpur Stock Market Composite Index with four macroeconomic determinants, namely real interest rate, exchange rate, inflation rate and GDP from January 1988 to 2019 on a yearly basis. However, most of the studies are carried out in developed countries and large economic nations instead of in emerging markets such as Malaysia. Time series stationarity, cointegration and Granger causality tests and Vector Error Correction Model (VECM) approach are used in this paper. The findings suggest that stock market composite index and exchange rate have a bidirectional Granger-causality. The changes of exchange rate have a significant effect on the changes of stock market as well as economy of Malaysia.