Impact of interest rate fluctuations on stock market performance : empirical evidence from the MENA region -

Abstract

This project studies the dynamic relationship between interest rate fluctuations and stock market performance in both Egypt and Morocco. Prior to conducting the analysis, a unit root test is applied and determined that both interest rate and stock market series were not stationary. Johansen cointegration test reveals a long-run relationship between the two parameters in Egypt in the framework of an error correction mechanism (ECM), but failed to detect any evidence of this linkage in Morocco in the context of a Vector Autoregression Model (VAR). Granger causality testing however found no short-run causality from interest rates to stock market in both countries. The study uses monthly data from February 2007 up to May 2015.