Impact of Interest Rate, Inflation Rate, Exchange Rate and Gold Prices on Karachi Meezan Index 30

  • Syed Wajahat Haider Institute of Business Administration, Karachi. Pakistan.
Keywords: Stock Market, Shariah Compliant, KMI 30, Interest rate, Exchange rate, Inflation rate, Gold price, Multiple Regression Model


Stock market performance have a significant impact on economic development of a country. Stock markets are supposed to be affected by different financial and macro-economic variables such as gold and oil prices, inflation rate, interest rate, exchange rate and unemployment rate etc. This study is an attempt to find the impact of financial and macro-economic variables on the Karachi Meezan Index 30, the first Islamic Stock index in Pakistan. Monthly data from July 2011 till June 2016 of the variables KMI Index 30, Interest rate, Inflation rate Exchange rate and Gold price is used in this study to find the impact of Interest rate, Inflation rate, Exchange rate and Gold prices on KMI 30 by using Multiple regression model. The empirical result shows that there is a negative relationship of KMI 30 index with interest rate and gold prices whereas a positive relationship exist between exchange rate and KMI 30 Index. Inflation rate did not show a significant relationship with KMI 30 Index in our regression model.

Author Biography

Syed Wajahat Haider, Institute of Business Administration, Karachi. Pakistan.
Lecturer, Commerce Department


Abdalla, I. S., & Murinde, V. (1997). Exchange rate and stock price interactions in emerging financial markets: evidence on India, Korea, Pakistan and the Philippines. Applied financial economics, 7(1), 25-35.

Abdullah, D. A., & Hayworth, S. C. (1993). Macroeconometrics of stock price fluctuations. Quarterly Journal of Business and Economics, 50-67.

Akbar, M., Khan, S. A., & Khan, F. (2012). The relationship of stock prices and macroeconomic variables revisited: Evidence from Karachi stock exchange.

Al Mutairi, A., & Al Omar, H. (2007). Macroeconomic determinants of the behavior of Kuwait stock Exchange.

Allen, L., & Jagtiani, J. (1997). Risk and market segmentation in financial intermediaries' returns. Journal of Financial Services Research, 12(2-3), 159-173.

Basit, A. (2013). Impact of KSE-100 index on oil prices and gold prices in Pakistan. IOSR J Bus Manag (IOSR-JBM), 9(5), 66-69.

Chen, N. F., Roll, R., & Ross, S. A. (1986). Economic forces and the stock market. Journal of business, 383-403.

Fama, E. F. (1981). Stock returns, real activity, inflation, and money. The American Economic Review, 71(4), 545-565.

French, K. R., Schwert, G. W., & Stambaugh, R. F. (1987). Expected stock returns and volatility. Journal of financial Economics, 19(1), 3-29.

Gan, C., Lee, M., Yong, H. H. A., & Zhang, J. (2006). Macroeconomic variables and stock market interactions: New Zealand evidence. Investment Management and Financial Innovations, 3(4), 89-101.

Geske, R., & Roll, R. (1983). The fiscal and monetary linkage between stock returns and inflation. The journal of Finance, 38(1), 1-33.

Gultekin, N. B. (1983). Stock market returns and inflation: evidence from other countries. The Journal of Finance, 38(1), 49-65.

Hanif, M., Shah, Z. A., & Iqbal, A. M. (2015). Impact of Real Sector Variables on Shari’a Compliant Stock Returns. Pakistan Journal of Commerce and Social Sciences, 9(1), 01-17.

HERVE, D. B. G. H., Chanmalai, B., & Shen, Y. (2011). The study of causal relationship between stock market indices and macroeconomic variables in Cote d’Ivoire: Evidence from error-correction models and Granger causality test. International Journal of Business and Management, 6(12), 146.

Humpe, A., & Macmillan, P. (2009). Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan. Applied Financial Economics, 19(2), 111-119.

Jawadi, F., Jawadi, N., & Louhichi, W. (2014). Conventional and Islamic stock price performance: An empirical investigation. International Economics, 137, 73-87.

Muhammad, N., Rasheed, A., & Husain, F. (2002). Stock Prices and Exchange Rates: Are they Related? Evidence from South Asian Countries [with Comments]. The Pakistan Development Review, 535-550.

Pakistan Stock Exchange, Karachi Meezan Index Brochure, (2010), retrieve from

Quadir, M. M. (2012). The effect of macroeconomic variables on stock returns on Dhaka Stock Exchange. International Journal of Economics and Financial Issues, 2(4), 480.

Rafay, A., Naz, F., & Rubab, S. (2013). Causal relationship between macroeconomic variables: Evidence from developing economy.

Shahzadi, H., & Chohan, M. N. (2012). Impact of gold prices on stock exchange: A case study of Pakistan. KSE (Karachi Stock Exchange of Pakistan), Working Paper Series.

Shamsuddin, A. (2014). Are Dow Jones Islamic equity indices exposed to interest rate risk? Economic Modelling, 39, 273-281.

Sohail, N., & Hussain, Z. (2009). Long-run and short-run relationship between macroeconomic variables and stock prices in Pakistan: The case of Lahore Stock Exchange. Pakistan Economic and Social Review, 183-198.

How to Cite
Haider, S. W. (2018). Impact of Interest Rate, Inflation Rate, Exchange Rate and Gold Prices on Karachi Meezan Index 30. European Journal of Islamic Finance, (10).