Economic Forces and the Thai Stock Market, 1993-2007
NIDA Economic Review, Vol. 4, No. 2, pp. 1-12, December 2009
12 Pages Posted: 7 Apr 2011 Last revised: 17 Jul 2014
Date Written: April 5, 2011
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.
Keywords: Stock market returns, macro variables, unit root, cointegration, causality
JEL Classification: G19, C22
Suggested Citation: Suggested Citation