Moderating Effects of Oil Price on the Impact of Macroeconomic Variables on Stock Market Performance

Abstract

This study makes examination of the moderating effects of oil price on the impact of inflation, exchange rate and interest rate variables on stock market performance as proxied by the Tanzania All Share Index. It uses monthly time series from January 2009 to December 2019. The model capturing the direct impact of the macroeconomic factors on the index of stock market shows that exchange rate and interest rate exert positive and significant impact on the stock market performance, while, inflation has negative and significant effects on the stock market performance. The moderating effect model shows that oil price has a moderation effect on the effect of inflation on stock market performance. It also reveals that the impact of exchange rate on stock market performance is strengthened by changes in oil price thus suggesting a positive moderation. The results imply that a growing economy and oil importing country like Tanzania needs to properly model its macroeconomic variables with oil price in order to improve performance of stock market.