Stock market performance: Reaction to interest rates and inflation rates

This paper investigates the wealth effects of consumer price index, interest rate, domestic credit and real economic activity on Amman Stock Exchange performance. Over period 1991–2020 using autoregressive distributed lag (ARDL) bounds test. While rate is a powerful monetary tool to fight inflation recession, it can be detrimental investors. The target variables, index (CPI) (IDR), are both highly significant with correct signs. An increase 1 percent in CPI IDR leads fall stock prices by 1.6 5 percent, respectively. central bank targeting raising rates, its actions reflect negatively market. short-run model confirms causality from independent variables dependent variable. Moreover, error correction term (ECT) very high at level amounting 83.3 which evidence long-run relationship. Monetary objectives really important, but financial stability also important.