Financial, Economic And Political Nexus:Analysis Of Emerging And Advanced Countries

Financial and economic performances are the key benchmark for any country. Exchange rate fluctuation adversely affects financial and economic performance. This problem is faced by almost all worlds’ economies. Non-financial factors like political stability has also play important role in this problem. So this research study focused on: Firstly, financial performance of the country can be measured on the basis of the stock market capitalization. Stock market is affected by political stability, oil prices changes, exchange rates movements and kind of freedoms i.e. business, financial, investment. Oil prices and exchange rates fluctuations have mixed directional relationship with the stock market. Role of political stability has significant and sensitive relationship with stock market fluctuations and likewise the freedom. So, this research study focused on the relationship of the financial performance with the currency fluctuation, oil prices changes and political stability. Secondly, Economic performance can be measured on the basis of gross domestic product of the country. Gross domestic product is one of the important barometers to measure the economic growth. Currency rate volatility and fluctuation in oil prices adversely affects the economic growth. Political stability causes economic or vice versa or it run both ways. Freedoms of the country i.e. monetary, trade and fiscal are important in measuring the economic growth of the country, so this research aimed to examine the relationship of the economic performance with the currency fluctuations, oil price changes and political stability. Thirdly, examined relationship of exchange rate with the political globalization index, imports, exports, interest rate and foreign reserves of the most advanced and emerging countries by taking as an individual case of each country. Lastly, this research study has also focused to find the relationship of the emerging and developed countries in comparison of stock market, economic stability and political stability.This study comprises of three main empirical investigations: financial performance, economic performance and exchange rate volatility by taking16economies for a period of39years ranging from1975to2013. The results are investigated by the cointegration analysis.The findings of comparison of the advanced and emerging countries in term of financial, economic and political stability showed that the stock markets of emerging countries are much more sensitive to the economic growth and political stability while advanced countries are not. No clear comparison in term of magnitude and direction can be made among the developed and emerging nations as no group of countries appear to be more sensitive to the changes in the stock market and political stability. The political stability of developed countries is more sensitive to the economic growth and the financial performance.