简介：

简介：Thispaperexaminestherelationshipbetweenstockmarket(KSE-100),moneymarket(M2and180daysT-billrate),andforeignexchangemarket(ER:PKR/USD)inPakistanbyusingmonthlydatacoveringtheperiodfrom2000:M1to2015:M12.Thestudyinvestigateslong-runequilibriumrelationshipbetweenthesethreefinancialmarketsbyemployingJohansenandJuselius[1]cointegrationtests.Long-runandshort-runcausalityrelationshipbetweenstockmarketandothermacroeconomicvariablesisalsoestablishedbyemployingvectorerrorcorrectionmodel(VECM)andpairwisegrangercausalitytests.Theresultsofmultivariatecointegrationtest(tracetest)indicateaonecointegratingvector,andthesignificantnormalizedcointegratingcoefficientsareevidentoflongrunequilibriumrelationshipbetweenalltheselectedvariables.NegativeandsignificantECT(-1)forallvariablesduringfullsampleperiodwitnessthepresenceoflong-runcausalityconnectionamongvariables,whileduringthemilitaryregimeanddemocraticregime,significantdifferenceoflong-runcausalconnectionsareidentifiedacrosstheregimes.Moreover,theresultsofgrangercausalitytestalsoindicatethattherearesignificantvariationsinthecausalityrelationshipamongvariablesacrosstheregimes.Therefore,itisessentialforforecasting,planningandpolicymakingtoconsidertheimportanceofpoliticalgovernancesystemwhileanalyzingthehistoricalcointegrationamongfinancialmarketandmakethenecessaryadjustmentsaccordingly.