The impact of inflation and financial crisis on stocks' prices in Amman ٍStock Exchange : UVAR model

Abstract EN

This study aims at investigating the impact of inflation and the late financial crisis in 2008/2009 on stock prices in the Amman Stock Exchange (Jordan) over the period (1992- 2014).

An unrestricted vector autoregressive (UVAR) model with five variables has been used (the variables: stock prices, gross domestic product, financial crisis, interest rate, and inflation rate).

The unit root tests have shown that all the variables are stationary in different orders.

Two major tools were used for analysis: variance decomposition and impulse response function.

It is found that the late global financial crisis is the most influential factor in explaining the variation of stock prices with a negative impact, then inflation comes second with a negative impact compared to the other two variables; gross domestic product and interest rate.