The south and east Asian stock market as affected by exchange rate regime and foreign remittances

Abstract

The purpose of the present study is to examine the impact of foreign remittances, exchange rate, GDP per capita and exchange rate regime on Stock market of South and East Asian countries. The yearly panel data used in this study are the stock market index or stock prices from stock exchange of Asian countries. The data for Foreign remittances, GDP per capita, exchange rate and exchange rate regime is collected from world bank indicator. The period covers 1995 to 2015, generalize method of movement (GMM) model are used to capture the impact of explanatory variables on security market. The result of the present study shows that foreign remittance, exchange rate and exchange rate regime does not affect stock exchange market while GDP per capita have positive and significant impact stock market using Generalize method of movement (GMM) model. There is negative relationship between foreign remittances and stock market and while the rest of the explanatory variables i-e exchange rate, GDP per capita and exchange rate regime have positive relationship among them. Other three important economic variables that are commonly used in research to explain changes in stock prices have been excluded from the present paper namely: interest rate, Foreign Exchange Reserve, money supply and foreign direct investment. The excluded of interest rate and money supply was due to the lack of consistent data for the study period. However, the Foreign Exchange Reserves variable was negative and insignificant when included in the regression model.