The Effect of Macroeconomic Variables on the Stock Prices of Listed Manufacturing Firms in Ghana

Abstract

Abstract

This study examines the impact of key macroeconomic variables—interest rates, inflation rates, and exchange rates—on the stock prices of listed manufacturing firms in Ghana. Grounded in the Arbitrage Pricing Theory and the Efficient Market Hypothesis, the study employs a quantitative panel data approach covering the period 2015–2024. Using descriptive statistics, correlation analysis, and fixed-effects regression estimation, the analysis explores how macroeconomic fluctuations influence stock performance within Ghana’s manufacturing sector. The results indicate that interest rate has a significant negative effect on stock prices, implying that tighter monetary policy and higher borrowing costs reduce equity demand and firm profitability. Inflation exhibits a negative but statistically insignificant relationship with stock prices, suggesting that firms and investors absorb moderate inflationary changes. Conversely, exchange rate depreciation significantly increases stock prices, indicating that a weaker cedi enhances export competitiveness and firm valuation. The findings underscore that manufacturing stock prices in Ghana are highly sensitive to macroeconomic dynamics, emphasizing the importance of monetary and exchange rate stability in sustaining investor confidence and industrial growth.

Keywords: Stock price, interest rate, inflation rate, exchange rate, Ghana Stock Exchange.