Stock Market & the Economy: Evidence from Philippines

Abstract

This study reviews prior literature on the relationship between the stock market and the economy and conducts a simple analysis on the same empirically for Philippines. The study utilizes quarterly data from 2003 to 2015. Results show that increases in past quarter real GDP growth causes a 0.56 increase in the present quarter real GDP growth. In addition, increases in past quarter PSI index returns cause a 0.04 increase in real GDP growth in the present quarter. Moreover, the study identifies an inflation-GDP growth puzzle for Philippines. Results support the permanent income and the financial accelerator views.