Impact of Different Exchange Rate Policies on Stock Market Performance: Kuwait vs Saudi Arabia

Abstract

This paper examines the intricate relationship between exchange rate policies and stock market performance, focusing on Kuwait and Saudi Arabia in the Gulf region. It investigates the historical evolution of exchange rate regimes in both countries, analyzing their unique policy objectives. Using empirical analysis, the research explores the correlation between exchange rates and stock market indices, employing statistical methods and regression analysis to identify patterns. Comparative assessments reveal distinct patterns in stock market performance, shedding light on the effectiveness of different exchange rate systems in shaping economic dynamics. The findings contribute to the literature by offering insights into the nuanced relationship between exchange rate policies and stock markets, with implications for policymakers, investors, and financial analysts. By focusing on Kuwait and Saudi Arabia, two pivotal economies, the study addresses a gap in the literature, providing a comparative perspective. Policymakers can use the findings to understand the potential impact of exchange rate policies on economic indicators. Investors can leverage the conclusions to inform their decision-making, considering the nuances of exchange rate dynamics. The study finds that both countries peg their currencies to major world currencies, primarily the USD, and identifies a strong correlation between the Kuwait Stock Index and the Saudi Tasi Index.