Causality of Macroeconomic Factors on the Movement of Financial (FIN) Index of the Philippine Stock Exchange

Rollon, Patrick Glenn; Peñas, Precious Jane; Concha, Jeamuel Jan; Murcia, John Vianne

doi:10.2139/ssrn.2780302

Cited by 1 publication

(2 citation statements)

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“…The authors explained that this should not be the case, as there should be a three-directional relationship between FDI, the economy, and the stock market. Rollon et al (2016) posit that there is a triangular relationship between FDI, the economy, and the stock market, with FDI promoting economic growth, which in turn positively impacts the stock market. In the short run, FDI benefits the PSEi by providing capital funding, technology, and expertise, which boosts the economy and leads to higher demand for stocks.…”

Section: Foreign Direct Investmentsmentioning

confidence: 99%

“…However, in the long run, the effects dissipate, and FDI becomes insignificant in its relationship with PSEi. Some countries found that there is no evidence of a significant relationship between FDI and economic growth because FDI can only advance economic growth under certain policy conditions (Rollon et al, 2016). These policy conditions may be difficult to attain in developing countries with weak institutional frameworks, such as the Philippines.…”

Section: Foreign Direct Investmentsmentioning

confidence: 99%

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Impact of Macroeconomic Variables on Stock Market Price Levels: Evidence from the Philippines

Sajor

Ulla

Pizzaro-Uy

2023

JEFAS

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The study investigates the short and long-run relationship between the Philippine Stock Exchange Index and macroeconomic variables interest rate, foreign direct investment (FDI), and exchange rate. Specifically, the paper analyzed annual secondary data from the inception of PSEi in 1985 to 2019. This study's theoretical and empirical research finds diverse perspectives on how each macroeconomic variable factors into the stock market price levels. The Philippine stock market has also grown remarkably during the past few decades. However, there is little to no comparable study in Philippine literature. So, by employing the ARDL bounds testing approach, the research adds to the body of literature by examining the macroeconomic factors influencing the growth of the Philippine stock market. The study adopted the Autoregressive Distributed Lag (ARDL) model to estimate the causality function, F-Bounds Test to establish long-run causal significance, and Error Correction Term (ECT) to determine how long until the adjustment of short-run errors to re-equilibrate to the long-run equilibrium. The results show that FDI has a positive cointegration in both the short and long run, the exchange rate has a positive cointegration both in the short and long run, and the lag of interest rate is positively significant in the short run and negatively significant in the long run.

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Section: Foreign Direct Investmentsmentioning

confidence: 99%

Section: Foreign Direct Investmentsmentioning

confidence: 99%