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| EconomyOfPakistan Home» Economy of Pakistan Today » The Stock Market |
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The Stock Market of Pakistan |
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The stock market plays an important role in the economy by mobilizing domestic resources and channeling them to productive investment. And, The Stock Market of Pakistan is no exception. This implies that the stock market must have a significant relationship with the economy. The relationship can be seen, in two ways. The first relationship views the stock market as the leading indicator of the economic activity in the country, whereas the second focuses on the possible impact the stock market may have on aggregate demand, particularly through aggregate consumption and investment.
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In other words, whether changes in stock market cause fluctuations in macroeconomic variables, like Consumption Expenditures, Investment Spending, Gross Domestic Product (GDP), Index of Industrial Production (IIP), or are caused by these variables is an interesting issue to be examined. The former case implies that stock market leads economic activity, whereas the latter suggests that it lags economic activity.
The Stock Market of Pakistan is developed to play its due role in influencing aggregate demand. A disturbing feature of the stock market in Pakistan is that it cannot be characterized as the leading indicator of economic activity. In the absence of other strong indicators, shooting up of stock prices may indicate a speculative bubble. In Pakistan fluctuations in macro variables cause changes in stock prices. Bloomberg ranks the KSE-100, the benchmark Pakistani index, as the world's top-performing stock market. Despite a correction early this year, the index is up 51.4% for the 12-month period . Barring some sort of political or war-related catastrophe, the market seems poised to continue its steady upswing
For more information about the Stock Market of Pakistan, check out our website, economyofpakistan.com.
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