The purpose of this research is to explain the impact of money supply on inflation in
the Syrian economy by using cointegration and causality test as a method during (1996 –
2010). The results of this research has showed that there is no causality
relation runs from
the money supply into inflation indicator. In addition, here is no long run effect between
the Consumer price index and the inflation in Syria as Johansson’s Co-integration Test has
showed.
This study is concerned in the long relation between monetary policy variable and
Damascus stock exchange (DSE) index,
In general, monetary policy transmission can affect the markets, so the stock market
also effected by that, and this study is in
terested in this relation, so it start by made
theoretical introduction about how can monetary variables effect the stock market index,
then it follow the statistical methodology by use Autoregressive-Distributed Lag model
(ARDL) to estimate the relation between independents variables which are money supply
M1,M2,exchange rate EX, interest rate I, inflation INF, and dependent variables which is
DSE index (M_I)
The result, by using the Unrestricted error correction model (UECM) shows that
there is positive relation in short and long term between money supply (M1) and DSE
index, but it was and negative one in short term between M2 and DSE index, and became a
positive in long term, and the relation was negative between inflation and DSE index in
short and long term. There was a negative one with exchange rate in short and long term,
and also negative one with interest rate.
As conclusion, it should be necessary to improve the behavior of monetary policy to
control all this variable in the way that made it has positive effects on DSE index.
Given The Importance of Relationship between Macroeconomic Variables and
Financial Market for Researchers, Investors and officials, This Relationship has been
Studied in This Research during Period 1-1-2010 to 31-12-2011 Using Monthly Data for
Nom
inal Effective Exchange Rate SNEER, Money Supply SM2, Exports Coverage
Imports SXM, Inflation Rate SINF, Damascus Market Index SDWX.
Stability of Time Series Studied through Augmented Dickey Fuller Test, Johansen
Co-Integration Test Confirmed There is Longitudinal Relationship-Term, Using Granger-
Causality Test Appeared That The Relationship Reciprocal between Money Supply and
The Index, Nominal Effective Exchange Rate is Causing Change in The Index, VAR
Model Estimated, and Characterized by High R2, Jarque-Bera Test Shows The Residuals
do not Follow Normal Distribution, Finally, Prediction in Some Time Periods Close to
Realistic Values of Index. By Analyzing This Result We Come up That The Relationship
between Macroeconomic Variables and Damascus Market Index has a Medium Strength.