Co-integration in Pakistan Between Karachi Stock Market and Inflation:

Abstract

The purpose of this paper is to establish the long run relationship between stock market and
inflation in Pakistan. Various studies have been conducted on the relationship of macro
economic variables on stock markets. These studies give theoretical support of doing work
in such direction. This paper checks the co-integration between Karachi Stock Exchange
index (KSE) and inflation. Based on Engle Granger test of co-integration it is found that
KSE Index and Inflation time series are co-integrated.