The impact of inflation to the stock market in Vietnam and recommendations
Abstract
There are many empirical studies in the world that research the relationship and causal side between stock prices and macroeconomic indicators such as inflation, interest rate, money supply, exchange rate,…However, these researches are implemented in US, UK, European countries,… My research is implemented in Viet Nam economy context, this research explores the relationship and causal side or direction between stock prices and inflation and sub indicators as interest rate, industrial production index by using monthly data covering from 2005 to June 2011. I used the multi-variables regression model and Granger causality model to conducting my research. The results indicated that the inflation and interest rate have negative relationship with stock prices and industrial production index has insignificantly positive relationship to stock prices. Moreover, the research also indicated that inflation and industrial production do not Granger cause stock prices but interest rate does. Besides that, stock prices does not Granger cause inflation but it does Granger cause interest rate and industrial production.