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Volume :24 Issue : 3 2017
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Impact of Money Supply Fluctuations on Stock Prices: A Model for Financial Markets in Gulf Cooperative Council (GCC) States
Auther : Bashar A. Aliraqi
The aim of this study is to examine the impact of money supply fluctuations on stock prices. The study reviews the major theoretical frameworks that deal with their impact mechanisms and channels. The study employs cointegration analysis for evaluating the long run relationships among study variables, Error correction model for measuring the short run dynamic relationships, and Granger causality for determine the direction of causality between the variables in Arabian Gulf countries for the period (1999-2013). The purpose is to take necessary measures to restrict negative effects and enhance positive ones and to obtain information that may help decision makers and investors reach the appropriate equilibrium for maximizing future returns of their portfolios. The results revealed a statistically significant effect of Money Supply Fluctuations as an indicator of Stock Prices during the period under study, though it was not very strong.