The Impact of the Exchange Rate, Inflation, and Interest Rate on the South African Benchmark Stock Market Index under Different Monetary Policy Regimes

This study analysed the asymmetric effects of the South African (SA) rand/United States (US) dollar nominal exchange rate, repurchase (repo) rate as proxy for interest rate and inflation on the Financial Times Stock Exchange (FTSE)/Johannesburg Securities Exchange (JSE) All Share Index (JALSH). The non-linear autoregressive distributed lag (NARDL) model was applied to quarterly data spanning the period 1980 to 2023. The estimation results indicate that there is a long-term negative relationship between the stock market benchmark index and the nominal bilateral exchange rate. The short-run dynamic ECM term under the NARDL model was negative and significant. The empirical results also revealed that there is a negative relationship between the stock market and inflation as measured by the consumer price index (CPI). This somewhat suggests that there is a long-term relationship between the stock market, the exchange rate, inflation, and interest rate.