Sia, Yiik Jing (2016) The impact of exchange rate regime and monetary variables on the stability of the capital market. An empirical analysis in the stock market. Masters thesis, Universiti Malaysia Sabah.
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Abstract
This study aims is to determine the relationship between stability of capital market and exchange rate as well as monetary variables. This study analyzes time series data which comprised of annually data from 1981 until 2015. In this study, there are five steps that have to be carried out to analyze the data which are unit root test, cointegration test, vector error correction model test, ARCH test and diagnostic test. The empirical results show that there exists a long run relationship among the variables that are tested which included stability of capital market, exchange rate, interest rate, inflation rate, and balance of payment by using the Johansen's cointegration test. The cointegrating vector suggests that stability of capital market is negatively related to exchange rate and inflation rate, it is positively related to interest rate and balance of payment. Besides that, the results from the vector error correction model (VECM) give information regarding on the effect of exchange rate, interest rate, inflation rate and balance of payment on stability of capital market in Malaysia. Real interest and consumer price index explains the most variations of stock price volatility in long run while exchange rate and balance of payment is significant only in short run. Furthermore, the result of ARCH test shows that the probability of chi-square is less than 5 percent. Thus, it has no ARCH effect and the model continued with ARCH family model such as GARCH, TARCH and E-GARCH. TARCH model has the lowest AIC and SIC value. TACH model is the best fitted model. Exchange rate and monetary variables played an important role in explaining the dynamic changes in the stability of capital market.
| Item Type: | Thesis (Masters) |
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| Keyword: | time series, stability, capital market, exchange rate, monetary variables time series |
| Subjects: | H Social Sciences > HG Finance |
| Department: | FACULTY > Faculty of Business, Economics and Accounting |
| Depositing User: | MUNIRA BINTI MARASAN - |
| Date Deposited: | 27 Oct 2017 15:42 |
| Last Modified: | 27 Oct 2017 15:42 |
| URI: | https://eprints.ums.edu.my/id/eprint/10779 |
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