The dynamic relationship between selected ASEAN stock markets and their macroeconomic variables

Abstract

This study investigates and analyzes the long run and short run relationships between selected ASEAN stock market indices and selected macroeconomic variables in a VAR framework. The ASEAN countries involved in this study are Indonesia, Malaysia, Philippines, Singapore and Thailand. The use of Johansen-Juselius Cointegration and Vector Error Correction Model (VECM) technique indicate that there are long run relationships between selected macroeconomic variables and stock market index in each of the ASEAN countries. Meanwhile, the Granger causality test indicates the existence of short run relationships between selected macroeconomic variables and stock market index. This study also shows that after a year the fluctuation of all the stock markets are caused by their own shocks.