The Effect of Selected Macroeconomic Variables on Performance of Securities Exchanges in the East African Community

Abstract

Little consideration has been paid to understanding the impacts of macro-economic factors on the performance of securities exchanges and yet the effective understanding of such effects is central to the resourceful working on the financial system in totality and for overall economic performance. Securities exchange like any business entity operates in an external environment and its performance is affected by the macro-economic factors. The goal of this paper was to investigate the impact of selected macroeconomic factors on the performance of securities exchanges in East African Community. The paper adopted a census method where all the four securities exchanges in East African Community were surveyed. The paper used secondary data. Data was analyzed on the basis of the mean and the F test statistic was computed at 5% significance level. Descriptive research design was used on the grounds that the study involved inspiring conclusions. The target population in this examination included the 4 East African Community Securities Exchanges. The study confirmed that independent variables analyzed namely; economic growth, inflation rates, money supply, interest rates and exchange rates explain 48.9% of securities exchanges performance. The study made conclusion that selected macro-economic factors affect the performance of securities exchanges in the East African Community. The study recommends that policy makers should formulate policies which are geared towards the stabilization of inflation rates and interest rates as well as exchange rates which will in turn promote foreign trade in the East African Community. This paper suggests a similar research be carried out but focus on West African securities exchanges.