Time Series Analysis of the Impact of Real Interest Rates on Stock Market Activity and Liquidity in Egypt: Co-Integration and Error Correction Model Approach

16 Pages Posted: 7 Sep 2003

See all articles by Mohammed Omran

Mohammed Omran

The Insurance Holding Company; Arab Academy for Science and Technology

Abstract

Since 1991 Egypt has witnessed major and radical changes in its economic climate as a result of the government's adoption of a program of economic reform aimed at increasing the growth rate of the economy. Arguably, this objective can be assisted through creating a strong stock market. This paper focuses on examining the impact of real interest rates as a key factor in the program on the performance of the Egyptian stock market, both in terms of market activity and liquidity. By applying Engle and Granger's two-stage procedure, results from co-integration analysis through error correction mechanisms (ECM) indicate significant long-run and short-run relationships between the variables, implying that real interest rates have an impact upon stock market performance.

Keywords: Real interest rates, Stock market, Egypt, Co-integration, Error correction mechanism

JEL Classification: C12, C22, E44, G10, O23

Suggested Citation

Omran, Mohammed M., Time Series Analysis of the Impact of Real Interest Rates on Stock Market Activity and Liquidity in Egypt: Co-Integration and Error Correction Model Approach. Available at SSRN: https://ssrn.com/abstract=420248 or http://dx.doi.org/10.2139/ssrn.420248

Mohammed M. Omran (Contact Author)

The Insurance Holding Company ( email )

7 Talet Herb Street
Cairo
Egypt

Arab Academy for Science and Technology ( email )

P.O. Box. 1029
College of Management and Technology
Miami, Alexandria
Egypt
(203) 5482 532 (Phone)
(203) 5566 072 (Fax)

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