Analyzing the Impact of Monetary Policy on the KSE-100 Index in Pakistan

Abstract

This research aims to examine the influence of monetary policy on the KSE-100 Index, which represents the performance of the Pakistan Stock Exchange. Monetary policy plays a crucial role in shaping economic conditions and investor sentiment, thereby affecting stock market dynamics. The aim of this research paper is to find whether there is a significant direct relationship between monetary policy of Pakistan and KSE-100 index. The research was based on sample of 100 companies our 581 companies listed on Pakistan stock exchange our research data was based on 15 years i-e from 2006-2020. The research gap that this research paper was targeted to encounter was to analysis impact of monetary policy of Pakistan on KSE-100 index on recent data of last fifteen years as research of recent data on such a large sample have ever done before in Pakistan. The research performs Pearson’s correlation and simple linear regression analysis, where one independent variable “Monetary Policy” was compared with on dependent variable “KSE-100 index” to find if there is any direct relationship with monetary policy and KSE-100 index. The research is based on secondary data two sites were mainly used, i-e official site of State Bank of Pakistan and Pakistan Stock Exchange. After validating all the assumptions, it was concluded that Monetary Policy of Pakistan has a direct significant relationship with KSE-100 index but with small correlation which means alone monetary policy fails to predict movement in KSE-100 index.