Examining the Relationship Between Macroeconomic Indicators and Stock Market Development in Morocco

The literature is still debating the key macroeconomic variables influencing the stock market development. This paper attempts to provide an empirical study to identify the macroeconomic conditions required for the stock market development in a developing country, in this case, Morocco. The goal is to determine whether macroeconomic variables can improve Moroccan stock market development. The purpose of this study, which covers the period 1996-2020, is to determine the macroeconomic factors that contribute the Moroccan stock market development. It examines the impact of economic growth, banking sector development, stock market liquidity, foreign direct investment and macroeconomic stability measured by the Barro’s Misery index. The autoregressive distributed lag approach (ARDL) was estimated, to get both the short and long run coefficients of the macroeconomic variables that determine Moroccan stock market development. The results reveal that stock market liquidity, banking sector development and foreign direct investment effect positively Moroccan’s stock market development, but macroeconomic stability effects it negatively. While the economic growth does not impact it, whether for the short or long run. There have been no relevant studies that have focused on the macroeconomic determinants of the Moroccan stock market in the short and long terms, despite the fact that theoretical and empirical literature offers diverse perspectives on which factors can determine stock market development. By examining the macroeconomic variables that contribute to Moroccan stock market development and introducing the misery index to assess the effects of macroeconomic stability, this study seeks to enrich the literature.