Unveiling the Dynamics: Exploring the Relationship between Emerging Stock Market Prices and Macroeconomic Factors through ARDL Analysis

Abstract

This study investigates the interaction between stock prices and prices in other markets using a panel ARDL model. Analyzing data from January 2004 to December 2022 for 19 emerging market countries, the study explores the impacts of gold prices, exchange rates, inflation rates, and interest rates on stock prices. The results indicate a long-term negative relationship, except for gold, between the variables. The effects are generally insignificant in the short run, except for gold's negative impact. The global financial crisis of 2008 negatively affected emerging market stock markets in both the short and long term. In the short run, the COVID-19 pandemic negatively impacted stock market returns, which turned positive in the long run. This study highlights the importance of sound monetary policies focused on price stability and fiscal policies aimed at reducing government dominance in financial markets to foster long-term growth in stock markets.