Macroeconomic determinants of the Ghana stock exchange market performance

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June, 2016
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This research looks at the profound impact of certain macroeconomic variables on the performance of the of Ghana Stock Exchange All share index, and therefore use the outcome to predict how the GSE performance would behave if there is a slight or greater change in the macroeconomic variables. The popular co- integration method was employed for the methodology and an annual data for both the GSE All share index and the five macroeconomic variables namely, interest rate, inflation, money supply, real GDP, exchange rate from 1990 to 2012 to ascertain how changes in the variables affect the GSE performance. The research finally attains a level where there is a long run equilibrium relationship existing between the dependent and independent variables (GSE All share index and the five macroeconomic variables). Also it was established that the effect of the macroeconomic variables on the Ghana stock Exchange in the short run is almost imaginary. The results show that real interest rate (RIR), Exchange rate (EXCH), Inflation rate (INF) and Real GDP have a negative impact on Ghana Stock Exchange (GSE). Money supply (M2) is the only variable that has a positive impact on Ghana Stock Exchange in the Short run. Exchange rate (EXCH), Inflation rate (INF) and Real GDP are statistically significant but the rest are insignificant. It therefore worthy to recommend that prospective investors are very particular about the fluctuations in the exchange rate and of course the interest rate. This is because these two determine whether the economy is fertile to invest in or otherwise since their changes has a repining or long run effect on the GSE.
A Thesis submitted to the Department of Economics of the College of Social Sciences and Humanities, Kwame Nkrumah University of Science and Technology, in partial fulfillment of the requirement for the award of Master of Science Degree in Economics.