Analysing the macroeconomic drivers of stock market development in the Philippines

Figures & data

Figure 1. The market capitalisation ratio of the PSE, 1990–2014.

Source: Authors’ own compilation based on WDI (2016).

Figure 2. Turnover ratios of the ASEAN-5 stock exchanges, 1990–2014.

Source: Authors’ own compilation based on WDI (2016).

Table 1. Proxies, sources and justifications of the variables used in this study

Variable	Proxy	Source	Justification
Stock market development (MCR)	Market capitalisation to GDP	Authors’ calculation based on WFE (2014) and IFS (2017)	Garcia and Liu (1999), Boyd et al. (2001), Yartey (2010), Şükrüoğlu and Nalin (2014)
Banking sector development (BNK)	Domestic credit to GDP	Authors’ calculation based on IFS (2017)	Levine, Loayza, and Beck (2000), Beck, Demirgüç-Kunt, and Levine (2007), Sehrawat and Giri (2016)
Inflation rate (INF)	Annual percentage change of consumer price index	Authors’ calculation based on IFS (2017)	Shan, Morris, and Sun (2001), Boyd et al. (2001), Marques, Fuinhas, and Marques (2013)
Exchange rate (REERI)	Real effective exchange rate index	IFS (2017)	Calvo, Leiderman, and Reinhart (1993), Abdalla and Murinde (1997), Chou (2000)
Economic growth (RGDPG)	Annual percentage change in real GDP	Authors’ calculation based on IFS (2017)	Levine and Zervos (1998), Deb and Mukherjee (2008), Carp (2012)
Trade openness (OPEN)	Sum of exports and imports of goods and services as a share of GDP	Authors’ calculation based on IFS (2017)	Rajan and Zingales (2003), El-Wassal (2005), Niroomand et al. (2014)
Stock market liquidity (TOR)	Turnover ratio	Authors’ calculation based on WFE (2014)	Garcia and Liu (1999), Yartey (2007), Billmeier and Massa (2009)

Source: Authors’ own compilation.

Table 2. Results of unit roots tests of the variables in levels and at the first differences

Dickey–Fuller generalised least squares (DF-GLS) test
Variable	Stationarity of all variables in levels		Stationarity of all variables at first differences
	Without trend	With trend	Without trend	With trend
InMCR	−0.346	−3.647**	−5.133***	−2.914*
lnBNK	−0.751	−0.893	−3.050***	−3.750***
lnINF	−2.856***	−3.233**	−	−
lnREERI	−0.332	−1.665	−4.762***	−5.409***
lnRGDPG	−3.037***	−3.371**	−	−
lnOPEN	−1.288	−1.771	−2.537**	−3.591**
lnTOR	−2.038**	−3.303**	−	−
Perron (PPURoot) test
lnMCR	−4.017	−4.357	−5.645**	−6.458***
lnBNK	−3.097	−4.055	−21.313***	−20.614***
lnINF	−4.252	−4.263	−5.607**	−5.434**
lnREERI	−4.446	−3.624	−7.308***	−7.214***
lnRGDPG	−5.171*	−3.713	−8.251***	−5.456***
lnOPEN	−3.253	−3.151	−14.213***	−12.911***
lnTOR	−5.012*	−5.705**	−	−

Source: Authors’ own compilation.

Note: “−” Denotes “not applicable”.

* Denote significance at 10%.

** Denote significance at 5%.

*** Denote significance at 1%.

Table 3. Bounds test F-test for co-integration

Dependent variable		Function			F-statistic		Cointegration status
lnMCR		F(lnMCR|lnBNK, lnINF, lnREERI, lnRGDPG, lnOPEN, lnTOR)			3.586*		Cointegrated
Asymptotic critical value (k = 6)
Pesaran et al. (2001), p. 300, Table CI(iii) Case III	1%			5%		10%
	I(0)		I(1)	I(0)	I(1)	I(0)	I(1)
	3.15		4.43	2.45	3.61	2.12	3.23

Note: *denotes significance at 10%.

Table 4. The long-run and short-run results of the selected model

Long-run results
Dependent variable is lnMCR
Regressor	Coefficient	Standard error	T-ratio	Probability
LnBNK	0.311	0.582	0.534	0.596
LnINF	−0.205	0.176	−1.164	0.251
LnREERI	−2.001	1.912	−1.047	0.301
LnRGDPG	0.105	0.086	1.219	0.229
LnOPEN	−2.336**	1.142	−2.045	0.047
LnTOR	0.059	0.233	0.252	0.802
Short-run results
Dependent variable is ∆lnMCR
∆lnMCR(−1)	0.335***	0.095	3.538	0.001
∆lnBNK	1.104***	0.349	3.161	0.003
∆lnINF	−0.030	0.033	−0.909	0.368
∆lnREERI	1.440***	0.416	3.462	0.001
∆lnREERI(−1)	−0.082	0.464	−0.177	0.860
∆lnREERI(−2)	1.303**	0.505	2.582	0.013
∆lnRGDPG	0.001	0.025	0.032	0.975
∆lnOPEN	0.078	0.206	0.381	0.705
∆lnTOR	0.045	0.032	1.385	0.173
C	4.239***	0.969	4.376	0.000
ECM	−0.176***	0.040	−4.362	0.000

Note: Δ = first difference operator.

Source: Authors’ own compilation.

** Denote 5% significant level.

*** Denote 1% significant level.

Table 5. Results of diagnostic tests

Test	Statistic	p-value
Serial Correlation: CHSQ(2)	1.178	0.555
Functional Form: F(1,43)	1.555	0.219
Normality: CHSQ (2)	0.735	0.693
Heteroscedasticity: CHSQ (1)	0.360	0.549

Source: Authors’ own compilation.

Table 6. The long-run and short-run results of the second model

Long-run results
Dependent variable is lnMCR
Regressor	Coefficient	Standard error	T-ratio	Probability
LnBNK	0.666	0.680	0.980	0.332
LnREERI	−1.170	1.565	−0.747	0.459
LnOPEN	−1.920**	0.907	−2.118	0.040
Short-run results
Dependent variable is ∆lnMCR
∆lnMCR(−1)	0.386***	0.095	4.065	0.000
∆lnBNK	1.233***	0.317	3.888	0.000
∆lnREERI	1.439***	0.404	3.561	0.001
∆lnREERI(−1)	−0.102	0.447	−0.228	0.820
∆lnREERI(−2)	1.366***	0.465	2.936	0.005
∆lnOPEN	0.087	0.179	0.489	0.627
C	3.024***	0.649	4.660	0.000
ECM	−0.179***	0.039	−4.645	0.000

Note: Δ = first difference operator.

Source: Authors’ own compilation.

** Denote 5% significant level.

*** Denote 1% significant level.

Table 7. Results of diagnostic tests of the second model

Test	Statistic	p-value
Serial correlation: CHSQ(2)	2.205	0.332
Functional form: F(1, 46)	0.361	0.551
Normality: CHSQ (2)	1.165	0.559
Heteroscedasticity: CHSQ (1)	0.382	0.537

Source: Authors’ own compilation.

Figure A1(a). The plot of the cumulative sum of recursive residuals of the main model.

Figure A1(b). The plot of the cumulative sum of squares of recursive residuals of the main model.

Figure A2(a). The plot of the cumulative sum of recursive residuals of the second model.

Figure A2(b). The plot of the cumulative sum of squares of recursive residuals of the second model.

Source: Authors’ own compilation. Note: The straight lines represent critical bounds at 5% significant level.

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