Interdependencies of Stock Index, Oil Price, Gold Price and Exchange Rate: A Case Study From Pakistan

Abstract

The core objective of the research conducted is to explore the interactions of stock index, gold price, crude oil price and exchange rate in Pakistan from September 1997 to April 2018. The interaction is examined by concurrent equations. For analyzing the trend of Pakistan economy, unit root test, correlation test, co-integration technique, vector autoregressive model, granger test is done. The result indicates absence of long run relationship among all of the variables. However, results demonstrate significant effect of crude oil price & Gold price on exchange rate. Whereas, Pakistan stock market is affected by exchange rate. Recommendations for the government are given to give more focus on economic policies for crude oil price, stock index, gold price and exchange rate to make them stable in the country. The study is tremendously beneficial for high authorities in business, policy and decision maker in the country and as well as investors because they can predicate and able to understand the fluctuation of these variables in the economy. Statistical software used for this study is EVIEWS 9^th edition.