Modeling the Impact of Interest Rate Volatility on Stock Market Performance: Evidence from Ghana
DOI:
https://doi.org/10.54536/ajase.v5i2.6108Keywords:
Financial Markets, GARCH Model, Ghana, Interest Rate Volatility, Stock Market Performance, Time Series AnalysisAbstract
This paper investigates the impact of interest rate fluctuations on the performance of Ghana’s stock market using a time series econometric approach. Monthly data on interest rates and stock returns were analyzed to capture both short-run and long-run relationships through the application of ARCH/GARCH and VAR modeling techniques. The empirical results demonstrate that volatility in interest rates significantly influences stock market behavior. Elevated interest rate volatility is found to depress stock returns, indicating that investors react strongly to macroeconomic uncertainty. The analysis also shows that monetary shocks affect the equity market with a delayed response, suggesting that price adjustments occur gradually rather than instantaneously. These findings highlight the importance of understanding the transmission of interest rate volatility to stock returns for effective monetary policy design and strategic investment decision-making in Ghana.
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Copyright (c) 2026 Emmanuel Chinton, Joseph Kofi Senade
This work is licensed under a Creative Commons Attribution 4.0 International License.
