The impact of crises on the relationship between stock market development and macroeconomic variables: evidence from Hong Kong and Singapore

Ingrid  Majerová; Tomáš  Pražák

doi:10.23762/FSO_VOL8_NO4_2

Published : 2020-12-28

Vol. 8 No. 4 (2020)

The impact of crises on the relationship between stock market development and macroeconomic variables: evidence from Hong Kong and Singapore

Ingrid Majerová

http://orcid.org/0000-0002-0835-9128

Tomáš Pražák

http://orcid.org/0000-0002-4119-8530

DOI: https://doi.org/10.23762/FSO_VOL8_NO4_2

Abstract

Dynamic linkages between macroeconomic factors and stock market developments in the economies of Hong Kong and Singapore are the subject of investigation in this paper. These city-states belong to the world’s most globalised economies and are two of the world’s four largest financial centres. In the crisis years, both these countries experienced a decline in GDP, faced the threat of deflation, and their foreign trade turnover decreased. The crisis also affected the financial sector. This paper aims to ascertain the impact of structural economic changes, namely the financial crisis, on the prosperity of these advanced economies. The basic characteristics of determinants of economic development and the analysis of the mutual relationships of selected macroeconomic indicators with the financial markets serve to meet the aim of this paper. The macroeconomic variables used in most research are GDP, the interest rate, the inflation rate, money supply and the unemployment rate. To test the dependence of these indicators, a regression model was constructed, and the period from 2005 to 2016 was chosen for observation. From the linear regression equation, it is obvious that the unemployment rate, the exchange rate and the interest rate have a prevailing negative effect on equity returns, in contrast to money supply, which has a prevailing positive effect. The Chow test confirms that the global financial crisis at the end of 2008 had a negative impact on the predictive ability of the chosen linear regression analysis in the long-term time horizon in both countries.

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Hong Kong, macroeconomic variables, regression model, Singapore, stock market

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Majerová, I. ., & Pražák, T. . (2020). The impact of crises on the relationship between stock market development and macroeconomic variables: evidence from Hong Kong and Singapore. Forum Scientiae Oeconomia, 8(4), 27–41. https://doi.org/10.23762/FSO_VOL8_NO4_2

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Ingrid Majerová

majerova@opf.slu.cz
http://orcid.org/0000-0002-0835-9128

Affiliation:

Silesian University in Opava, School of Business Administration in Karvina, Czech Republic

Bio Statement (e.g., department and rank)

Ingrid Majerová, PhD, is an Assistant Professor at the Silesian University in Opava, School of Business Administration in Karvina, Czech Republic, and Deputy Head of the Department of Economics and Public Administration. She specialises in the area of economics, international economics and international development issues. Her work has been published in monographs and various impact journals. She is actively involved in domestic and foreign projects.

Tomáš Pražák

prazak@opf.slu.cz
http://orcid.org/0000-0002-4119-8530

Affiliation:

Silesian University in Opava, School of Business Administration in Karvina, Czech Republic

Bio Statement (e.g., department and rank)

Tomáš Pražák, PhD, is an employee of the Department of Business Economics and Management at the Silesian University in Opava, School of Business Administration in Karviná, Czech Republic. His areas of expertise are business economics, management, macroeconomics, and international finance. He works as a specialist at the Institute of Interdisciplinary Research.