The Impact of Interest rate and exchange rate on stock market of Pakistan

Abstract

This study was an attempt to create a model, to sort out the relation including “stock market” over “Exchange rate” and “interest rate” of (Pakistani market) by running certain type of tests which is related to statistical findings. The statistical findings run through different tests which was taken with the help of week end closing index prices of “stock exchange” of Karachi and “interest rate” & “exchange rate” of previous five years i-e July 2009 to 31st June 2014. Regression analysis, Correlation analysis, and descriptive statistical tests were taken to sort out the effect of interest rate and rate of exchange over stock market of Pakistan. The Pakistani performance of stock market is strongly dependent on the situation of political stability. The main and most essential factor of one country and their economy is stock market. And there are also some factors which may have positive and negative influence on the market of stock exchange. In this study I am going to consider two factors which is “rate of interest” and “exchange rate” on “Stock market” which is showing positive impact related to each other, and clearly shows that the fluctuation and variation on prices of Interest and exchange rate between the dates from 2009 to 2014 doesn’t effect on the stock exchange performance.