An analysis on the relationship of the budget surplus or deficit and the Philippine stock market for the period 1975-1997

• Main Authors: Carabeo, Bona, Garcia, Juan Miguel, Jose, Hiroki, Maghari, Jose
• Format: text
• Language: English
• Published: Animo Repository 1999
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/17088
• Institution: De La Salle University

The proponents of this thesis paper have answered the questions to the objectives of the study which were to establish whether or not there is linear relationship between the budget surplus or deficit as a percent of GNP and the Stock Price Index to identify whether the relationship is positive or negative to forecast the Stock Price Index given the budget surplus or deficit as a percent of GNP to prove that the relationship between the two variables cannot be explained to chance or is not due to chance to determine the percentage change in the Stock Price Index for the current and following year given the budget surplus or deficit as a percent of GNP and to determine whether the budget deficit is caused by an increase in expenditures or a decrease in the revenue collection. Since the r of the Regression Summary is .62433 the group has concluded that there is indeed a linear relationship between the budget surplus or deficit as a percent of GNP and the Stock Price Index. Furthermore, since the beta of the Regression Summary #1 is -.62433 the group also concluded that the relationship is negative which analyzed further means that 62.433% of the time, the budget surplus or deficit as a percent of GNP inversely moves the Stock Price Index. In addition, 38.9784% of the changes in the Stock Price Index are due to changes in the budget surplus or deficit as a percent of GNP. The study has complied with the various statistical tests to prove the significance and the validity of the data and the results. So, the group has concluded that the results are statistically sound and valid. But, no thesis paper is perfect and this is an example of it. The forecasted Stock Price Index level for 1998 is 444.15 while the actual for 1998 was 539.39. Although the group has proven that our forecast was statistically sound, there is still a discrepancy between the actual and the forecasted Stock Price Index level. Duplicating the study of Robert Eisner in the United States, wherein he regressed the Dow Jones with the constant budget deficit as a percent of GNP and its lag variable, the group regressed the Stock Price Index with the budget surplus or deficit as a percent of GNP and its lag variable. The group concludes that the budget deficit would be related with a 4.33 percent annual increase in the Stock Price Index. For each percentage point GNP that this actual deficit increased, there would be a further 1.07 percent increase in the Stock Price Index in the current year and another 1.81 percent increase the following year. To comply with the sixth and last objective of this thesis which was to identify whether the budget deficit was caused by the decrease in revenue collection or the increase in the expenditures of the government, the group measured the percentage increase in the expenditures and the percentage decrease in the revenue collection of the national government to get the cause behind the budget deficit. The group concludes that the budget deficit is caused by an increase in the expenditures of the government 59.10 percent of the time, while the shortfall in revenue causes the budget deficit 40.90 percent of the time.