Economic Forces and the Thai Stock Market, 1993-2007
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Abstract
This study examines the relationship between stock market index and
macroeconomic variables in Thailand. The results from Johansen cointegration test shows
that the variables are cointegrated. Thus there exists a long-run relationship between the
stock market index and a set of four macroeconomic variables. Real GDP, money supply,
and nominal effective exchange rate significantly impose a positive impact on the stock
market index while the price level insignificantly imposes a negative impact. The
financial crisis in 1997 has no influence on stock prices. The causality test results from an
error correction model show bidirectional causal relations between stock market return
and the growth rate in the long run and the short run.
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