Abstract
This study investigates the influence of key macroeconomic variables—specifically interest rates, inflation, exchange rates, and money supply—on both the aggregate and individual stock prices of firms listed on the Dar es Salaam Stock Exchange (DSE). Utilizing monthly data spanning from January 2012 to December 2016, the research analyzes 10 major companies across diverse sectors, including manufacturing and banking. The motivation for this study stems from the inconclusive and often contradictory findings in existing literature regarding the direction and significance of macroeconomic impacts on capital markets. The conceptual framework posits that while variables like inflation and exchange rates can have dual effects depending on economic expectations and firm-specific trade orientations (import vs. export), interest rates typically exert a negative pressure on stock valuations due to the increased opportunity cost of capital and higher discount rates. Conversely, money supply is generally expected to stimulate economic activity and corporate earnings, though its inflationary potential may offset these gains. By employing a country-specific empirical analysis for Tanzania, this paper aims to resolve theoretical ambiguities within the local context. The findings are intended to provide investors with better risk management insights and assist policymakers in formulating effective monetary and financial strategies to ensure market stability and enhance investor confidence in one of Africa's significant emerging stock exchanges.
Keywords. Dar es Salaam Stock Exchange (DSE); Macroeconomic variables; Stock price volatility; Monetary policy; Emerging markets.
JEL. C32; E44; G12; G15; O16; O24.
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