Macroeconomic Determinants of the Stock Market Index for a Major Latin American Country and Policy Implications

Applying the exponential GARCH model and based on a quarterly sample during
1998.Q1-2011.Q2, we find that the Argentine stock market index is positively associated with
real GDP, the ratio of M2 money supply to GDP, the peso/USD exchange rate and the U.S.
stock market index. It is negatively influenced by the money market rate, government
spending as a percent of GDP and the inflation rate. Hence, a strong domestic economy, a
lower interest rate, an increased money supply as a percent of GDP, lower government
spending as a percent of GDP, depreciation of the Argentine peso, a lower inflation rate, or a
robust U.S. stock market would help the Argentine stock market.