The relationship between stock market indices and macroeconomic indicators in Zimbabwe

Author

Mercy Makopa

Title

The relationship between stock market indices and macroeconomic indicators in Zimbabwe

Abstract

This study examines the dynamic relationships between stock market indices and key macroeconomic variables such as GDP, Inflation and interest rate in Zimbabwe for the period 2010 to 2022.The researcher employed longitudinal research design. Secondary data was obtained from ZIMSTAT, Reserve Bank of Zimbabwe and Zimbabwe Stock Excgange.Vector Auto Regression was employed to test the relationship between stock market indices and macroeconomic indicators. Data Analysis was performed using Python Jupiter Notebook software. The findings of this study indicated that GDP has a weak negative association with Zimbabwe Stock Exchange.Inflation,an independent variable has a positive relationship with stock market .Granger causality tests and VAR modelling also showed the importance of including time lags in determining the relationship between stock market performance and macro variables .Analysis of the cointegration tests showed one way long term co-movement between the ZSE All Share index and macroeconomic variables. The study’s key recommendation is that Policymakers are advised to direct their efforts towards adopting and achieving sound economic policies to encourage macroeconomic stability. Also, increased attempts to rebuild stock market investors’ confidence through appropriate and easily enforceable legislation and policies are very important.

Date

June 2024

Publisher

BUSE

Keywords

Stock market

Indices

Macroeconomic indicators

Supervisor

Mr Mukonoweshuro