The influence of global financial crisis on Jordanian equity market

VECM approach

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

The current paper attempts to analyse the causality and co-integration relationship between the global financial crisis and the general stock price index (SPI) in the Jordanian equity market for the 1978-2011 period. A vector error correction model (VECM) is utilised to test the causal relationship between SPI and its determinants [gross domestic product (GDP), money supply (M2), exchange rate (EX) and consumer price index (CPI)]. The results identify a co-integration between SPI and Jordanian macroeconomic variables indicating a long-run equilibrium relationship among them. The error-correction term coefficient has a significant negative sign pointed to the adjustment back from short-run disequilibrium to the long-run equilibrium. The Granger causality test suggests a bidirectional causal relationship between SPI and M2 in the short and long runs. In addition, the results reveal that the global financial crisis has a positive significant impact on the SPI.

Original languageEnglish
Pages (from-to)285-301
Number of pages17
JournalInternational Journal of Monetary Economics and Finance
Volume6
Issue number4
DOIs
Publication statusPublished - 2013

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Stock prices
Vector error correction model
Equity markets
Global financial crisis
Price index
Long-run equilibrium
Cointegration
Short-run
Error correction
Gross domestic product
Consumer price index
Macroeconomic variables
Causality
Disequilibrium
Coefficients
Granger causality test
Exchange rates
Money supply

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

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abstract = "The current paper attempts to analyse the causality and co-integration relationship between the global financial crisis and the general stock price index (SPI) in the Jordanian equity market for the 1978-2011 period. A vector error correction model (VECM) is utilised to test the causal relationship between SPI and its determinants [gross domestic product (GDP), money supply (M2), exchange rate (EX) and consumer price index (CPI)]. The results identify a co-integration between SPI and Jordanian macroeconomic variables indicating a long-run equilibrium relationship among them. The error-correction term coefficient has a significant negative sign pointed to the adjustment back from short-run disequilibrium to the long-run equilibrium. The Granger causality test suggests a bidirectional causal relationship between SPI and M2 in the short and long runs. In addition, the results reveal that the global financial crisis has a positive significant impact on the SPI.",
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The influence of global financial crisis on Jordanian equity market : VECM approach. / A. Bekhet, Hussain; Matar, Ali.

In: International Journal of Monetary Economics and Finance, Vol. 6, No. 4, 2013, p. 285-301.

Research output: Contribution to journalArticle

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