Effects of IMF Funding Announcement on Pakistan’s Stock Market Performance
Abstract
When the International Monetary Fund (IMF) announces loans to different economies, stock markets often respond differently. These loans are usually drawn with strict terms that may conflict with the political and economic goals of the country borrowing the money. It leads stock market participants to frequently view IMF announcements unfavorably. The current study aimed to investigate how the stock market in Pakistan's heavily indebted economy has performed in relation to the IMF's announcements about funding the country. To conduct this research, a quantitative approach was utilized to collect the data and determine the results. Secondary data was acquired from several websites dealing with IMF loaning as well as its effects on the performance of Pakistani stock market. The researcher subsequently employed descriptive statistics and regression analysis for data analysis. Additionally, secondary information regarding the impact of IMF lending announcement on Pakistan’s share market positions was obtained from the IMF platform and other relevant sources. IMF has been one of the main lenders to Pakistan since the late eighties. Therefore, this research sought to help understand the dynamics of how IMF loan announcements have affected Pakistan's stock prices from the time period (2015-2022). The results were established through acquired time series quantitative data. Findings indicate a strong positive correlation between IMF loan announcements and equity security performance indicators in Pakistan. Generally, when the IMF announces loans for Pakistan, the stock market tends to rise, suggesting that investors have confidence in the country's economy. Nevertheless, it must be noted that this relationship is not always consistent; there are instances where stock prices may decline following an IMF announcement. Hence, one may realize that IMF alone cannot account for variations in equity prices. Many other factors, such as political stability and global economic situation also play significant roles in stock market performance.
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