Impact of Macroeconomic Factors on Stock Indices Volatility: a GARCH Analysis for USA, Germany, Serbia and Croatia

Abstract The unfavorable global economic conditions caused primarily by the COVID-19 pandemic, as well as the ongoing geopolitical tensions and related disruptions, have adversely affected nearly all financial markets through the process of globalization. Considering these factors, this study analyzes, tests, quantifies, identifies, and compares the nature of correlation and the intensity of the impact of relevant macroeconomic variables on daily investment return rates in selected financial markets of developed countries (the United States and Germany) and emerging markets (Serbia and Croatia). The macroeconomic variables observed include inflation rate, reference interest rate, exchange rate, oil price, and gold price. Investment returns are analyzed through daily changes in the leading stock indices of the selected financial markets. The research covers the period from 2012 to 2022, examining results separately for three subperiods: the entire period (2012–2022), the pre-crisis period (2012–2019), and the crisis and post-crisis period (2020–2022). The results reveal that during the crisis period (2020–2022), stock market volatility in emerging markets (Serbia and Croatia) was primarily driven by exchange rate movements and commodity prices, while in developed markets (USA and Germany), it was more strongly influenced by interest rates and inflation. Furthermore, the estimated models indicate that the magnitude and direction of macroeconomic impacts vary substantially across markets and time periods. These findings provide valuable insight for investors and policymakers seeking to manage risk and respond to economic shocks in both mature and developing financial systems.