Asymmetric Volatility Spillover among Macroeconomic Variables and Pakistan Stock Exchange


  • Muzammil Hussain PhD Economics, Department of Economics, University of Sargodha, Sargodha, Pakistan.
  • Fahad Malik Lecture, Department of Economics, The Islamia University of Bahawalpur.
  • Mahnaz Muhammad Ali Associate Professor, Department of Economics, The Islamia University of Bahawalpur



The present research focused on the association of macroeconomic variables uncertainty with the volatility of stock market in Pakistan. The research explored uncertainties in macroeconomic series by common version of EGARCH and GARCH variances were used as proxies of volatilities. Furthermore, the series were incorporated into mean and variance equations to model spillover effect between stock market and indicators of macroeconomy. The association was additionally checked through VECM and Wald test methods. The investigation used monthly observations from January 2001 to December 2020. Findings revealed a significant causality amid macroeconomic volatility and stock exchange volatility. The outcomes also reconciled with Banumathy and Azhagaiah (2015); Wang (2011). A bilateral causal relationship was found between volatilities of gold prices and manufacturing output with stock market, whereas uni-directional causality was from exchange rate,  inflation and oil prices toward stock market.