This study investigates the short-run and long-run causal behavior of the Philippine stock market index volatility under vector error correction environment. The variables were tested first for stationarity and then long-run equilibrium relationship. Moreover, an impulse response function was estimated to examine the extent of innovations in the independent variables in explaining the Philippine stock market index volatility. The results reveal that the volatility of the Philippine stock market index exhibit long-run equilibrium relationship with Peso- Dollar exchange rate, London Interbank Offered Rate, and crude oil prices. The short-run dynamics-based VECM estimates indicate that in the short-run, increases (i.e., depreciation) in Peso-Dollar exchange rate cause PSEI volatility to increase. As for the London Interbank Offered Rate, it causes increases in PSEI volatility in the short-run. The adjustment coefficients used with the long-run dynamics validates the presence of unidirectional causal long-run relationship from Peso-Dollar exchange rate, London Interbank Offered Rate, and crude oil prices to PSEI volatility, and bidirectional causal long-run relationship between PSEI volatility and London Interbank Offered Rate. The impulse response functions developed within the VECM framework demonstrate the positive and negative reactions of PSEI volatility to unanticipated Peso-Dollar exchange rate, London Interbank Offered Rate, and crude oil price shocks.

Abstract
1. Introduction
2. Literature Review
    2.1. Stock Market Liquidity and Volatility
    2.2. The Link between Stock Market and ExchangeRate
    2.3. The Link between Stock Market and InterestRate
    2.4. The Link between Stock Market and CrudeOil Prices
3. Research Methodology
    3.1. Model Specification and Data Description
    3.2. Augmented Dickey–Fuller and Phillips–Perron Unit Root Tests
    3.3. Johansen-Juselius Cointegration Approach
    3.4. Vector Error Correction Model (VECM)
    3.5. Impulse Response Function
4. Results and Discussion
    4.1. Descriptive Statistics
    4.2. Augmented Dickey-Fuller and Phillips-PerronUnit Root Tests
    4.3. Long-run Equilibrium Relationship
    4.4. Short-run and Long-run Causal Relationship
    4.5. Impulse Response Function (IRF)
5. Conclusions
References

• Abraham C. CAMBA(Department of Economics, College of Social Sciences and Development, Polytechnic University of the Philippines, Philippines) Corresponding Author