The Effect of Macroeconomic Variables on Stock Exchange Market Performance: Iraq Stock Exchange Market as an Example

Abstract

The purpose of this study is to examine the impact of monthly time series data of macroeconomic variables from January 2005 to October 2021 on Iraqi’s stock market performance. The Iraqi Central Bank (ICB) was used to gather the information. This study used four macroeconomic factors as independent variables (money supply, interest rate, exchange rate and inflation rate), and market capitalization as a proxy for stock market performance as a dependent variable. All of the variables were stationary at a (level) according to the Augmented Dickey-Fuller (ADF) test. Money supply has a significant positive effect by nearly 0.50; interest rates have a significant negative effect 0.53; exchange rate has a significant positive effect by0.62; while the inflation rate has a negative but statistically nonsignificant on stock market performance by 0.002, according to the Autoregressive Distributed Lag (ARDL) regression results. Analysis of long-term macroeconomic variables and stock market performance shows that there is a long-term correlation. The true determinants of the Iraqi stock market’s success are money supply, exchange rate and interest rate, as all have a major impact.