Macroeconomic Determinants Of The Behavior of Kuwait Stock Exchange

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Macroeconomic Determinants Of The Behavior of Kuwait Stock Exchange

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Title: Macroeconomic Determinants Of The Behavior of Kuwait Stock Exchange
Author: Al Mutairi, Abdullah; Al Omar, Husain
Abstract: This paper is an atternpt to study the ffict ofmacroeconomic variables and the beh.aviour of Kapait stock exchange during the period from 1995 to 2005 using monthly data for both the market and its sub sectors. Interest rqte, mnney supply, inflation, and. government expenditure are the macro variables used, while marl<ct activity is represented by the value of traded shsres. Vector autoregression technique is employed to achieve this goal. The sndy indicates thqt macroeconomic variables have the expected but a lirnited impact on the activities of the Kmuait Stock Exchange. Concerning the size of the macroeconomic variables effect, the results show that macroeconornic variables hape a long run but limited ffict averaging 30Vo. However this effect varies across sectors with a range from 18Vo to 30Vo. In a closer look at the results, on ayerage, inflation has thc highest effect among the macro variables with an cwerage of IIVo, followed by money supply with an averege of 67o, then interest rate with an average of 4Vo, ann finally governrnent expenditure with an average of 2.6Vo. On the other hand, the results indicate, on cverqge, that a negative and long term effect of both interest rate and. inflation, a positive and. long term ffict of money supply, an'd. a positive and long term effict of government expenditure except for the insurance sector, These results are typical for emcrging markcts such as thnt of Knuait Stock Exch.ange where specalation dominates the activities in such markcts.
URI: http://hdl.handle.net/10576/6848
Date: 2007

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