Causality of Macroeconomic Factors on the Movement of Financial (FIN) Index of the Philippine Stock Exchange

The purpose of this study was to determine the causative relationship between the macroeconomic activities towards the Financials index of the Philippines Stocks Exchange. A descriptive-causative type of research was used to describe the behaviour of the macroeconomic variables, i.e. foreign direct investments, OFW remittances and peso-US dollar exchange rate, towards Financials (FIN) index of the Philippines for the period covering from January 2006 to October 2015. Bivariate Granger causality was used to determine the presence of causality between the variables. It was found out that the behaviour on each graph of each variable shows volatility and vulnerability from shocks caused by different factors in certain points of time. Results from bivariate estimations showed unidirectional relationship existing between OFW remittances and Financials (FIN) index of the Philippines. The same goes for the peso-US dollar exchange rate and Financials (FIN) index. On the other hand, the estimation showed a bidirectional relationship between foreign direct investment and the Financials (FIN) index having both of the variables significantly causing each other.