Dynamic Relations Between Macroeconomic Factors and the Jordanian Stock Market

Previous research has hypothesized the existence of a long-term equilibrium relation between stock prices and certain macroeconomic variables. The vector error correction model (VECM) (Johansen (1991)) is utilized to determine the impact of selected macroeconomic variables on Amman Stock Exchange (ASE). The variables are the real economic activity, money supply, inflation, and interest rate. The empirical results show that the stock prices and macroeconomics variables have a long-term equilibrium relation.Stock Market, Dynamic Relations, Cointegration, Jordan

Output Responses to Shocks to Interest Rates, Inflation, and Stock Returns: Evidence from Jordan

This paper studies the dynamic relationship between the Jordanian output and other macroeconomics variables such as inflation, interest rate and stock returns. It employs the Vector Auto Regressive (VAR) approach method of Lee (1992) to analyze the relationship and dynamic interaction among variables. The Impulse Response Functions (IRF), and the Forecast Error Variance Decomposition (FEVD) from the VAR model are computed in order to investigate inter-relationships in the system. The results show that the response of output to shocks in stock returns is strongly positive up to the first 6 periods and after which the effect almost dies.

Effects of Measurement on Inferences: An Application to Money Demand and Related Variables in the United States

This paper examines the impact of the choice of a money stock measure on the inference about monetary shocks. To this end, it adopts order-invariant forecast error variance decompositions (FEVD) for an unrestricted vector autoregressive (UVAR) model. This approach does not require orthogonalization of shocks and is invariant to the ordering of the variables in the UVAR. The empirical work is based on estimating UVAR model using different methods of measurement of monetary asset. The results suggest that empirical conclusions from the FEVD analyses differ when money is measured by the flow of monetary services rather than by summation of the dollar amount of monetary asset. Further, the results show that qualitative inference about the money’s effects on the economic activity can depend crucially on the definition of money chosen.Money, Monetary Policy, VAR.