The purpose of this study is to investigate the threshold effect of inflation on capital market performance. The study employed a Threshold Autoregressive model introduced by Tong (1978) and Hansen (1996). The study used secondary quarter-time series data for thirty-years from 1990 to 2019. The capital market performance was measured by the value of shares traded; market turnover; market capitalization and all-shares index. However, the results revealed the following estimated threshold level of inflation for each performance indicator: 3.77%; 4.12%; 4.15%, and 4.22% respectively. In all, the threshold level of inflation estimated was between 3 to 4%. The findings suggest that low inflation is performance-enhancing. Besides, inflation above the threshold level is detrimental to the capital market performance. The study further concluded that the exchange rate equally affects the performance of the capital market. The findings of this investigation might be helpful to the government of Ghana and policymakers as they settle on an inflation target to adopt to avoid the detrimental effects of high inflation while obtaining the growth benefits of low inflation.
| Published in | Journal of Business and Economic Development (Volume 5, Issue 4) |
| DOI | 10.11648/j.jbed.20200504.11 |
| Page(s) | 199-207 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2020. Published by Science Publishing Group |
Capital Market Performance, Inflation, Threshold Autoregressive, Market Capitalization All-Shares Index, Turnover Ratio
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APA Style
David Mensah Awadzie. (2020). The Threshold Effect of Inflation on Capital Market Performance: A Case of Ghana Stock Exchange. Journal of Business and Economic Development, 5(4), 199-207. https://doi.org/10.11648/j.jbed.20200504.11
ACS Style
David Mensah Awadzie. The Threshold Effect of Inflation on Capital Market Performance: A Case of Ghana Stock Exchange. J. Bus. Econ. Dev. 2020, 5(4), 199-207. doi: 10.11648/j.jbed.20200504.11
AMA Style
David Mensah Awadzie. The Threshold Effect of Inflation on Capital Market Performance: A Case of Ghana Stock Exchange. J Bus Econ Dev. 2020;5(4):199-207. doi: 10.11648/j.jbed.20200504.11
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Download@article{10.11648/j.jbed.20200504.11,
author = {David Mensah Awadzie},
title = {The Threshold Effect of Inflation on Capital Market Performance: A Case of Ghana Stock Exchange},
journal = {Journal of Business and Economic Development},
volume = {5},
number = {4},
pages = {199-207},
doi = {10.11648/j.jbed.20200504.11},
url = {https://doi.org/10.11648/j.jbed.20200504.11},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jbed.20200504.11},
abstract = {The purpose of this study is to investigate the threshold effect of inflation on capital market performance. The study employed a Threshold Autoregressive model introduced by Tong (1978) and Hansen (1996). The study used secondary quarter-time series data for thirty-years from 1990 to 2019. The capital market performance was measured by the value of shares traded; market turnover; market capitalization and all-shares index. However, the results revealed the following estimated threshold level of inflation for each performance indicator: 3.77%; 4.12%; 4.15%, and 4.22% respectively. In all, the threshold level of inflation estimated was between 3 to 4%. The findings suggest that low inflation is performance-enhancing. Besides, inflation above the threshold level is detrimental to the capital market performance. The study further concluded that the exchange rate equally affects the performance of the capital market. The findings of this investigation might be helpful to the government of Ghana and policymakers as they settle on an inflation target to adopt to avoid the detrimental effects of high inflation while obtaining the growth benefits of low inflation.},
year = {2020}
}
TY - JOUR T1 - The Threshold Effect of Inflation on Capital Market Performance: A Case of Ghana Stock Exchange AU - David Mensah Awadzie Y1 - 2020/10/30 PY - 2020 N1 - https://doi.org/10.11648/j.jbed.20200504.11 DO - 10.11648/j.jbed.20200504.11 T2 - Journal of Business and Economic Development JF - Journal of Business and Economic Development JO - Journal of Business and Economic Development SP - 199 EP - 207 PB - Science Publishing Group SN - 2637-3874 UR - https://doi.org/10.11648/j.jbed.20200504.11 AB - The purpose of this study is to investigate the threshold effect of inflation on capital market performance. The study employed a Threshold Autoregressive model introduced by Tong (1978) and Hansen (1996). The study used secondary quarter-time series data for thirty-years from 1990 to 2019. The capital market performance was measured by the value of shares traded; market turnover; market capitalization and all-shares index. However, the results revealed the following estimated threshold level of inflation for each performance indicator: 3.77%; 4.12%; 4.15%, and 4.22% respectively. In all, the threshold level of inflation estimated was between 3 to 4%. The findings suggest that low inflation is performance-enhancing. Besides, inflation above the threshold level is detrimental to the capital market performance. The study further concluded that the exchange rate equally affects the performance of the capital market. The findings of this investigation might be helpful to the government of Ghana and policymakers as they settle on an inflation target to adopt to avoid the detrimental effects of high inflation while obtaining the growth benefits of low inflation. VL - 5 IS - 4 ER -
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