Dynamic Relationship between Stock Prices and Exchange Rates in Emerging Markets
Domain:
socioeconomicRecord type:
paper
Creator:
VelSerÖzg
Publisher:
Host:
All the emerging markets are vulnerable to the fears of capital outflows after the US Federal Reserve's tapering on May 22, 2013. The term “Fragile Five” was introduced by a research note of Morgan Stanley to refer to the countries of Brazil, India, Indonesia, South Africa and Turkey. The aim of this study is to examine whether there are stock and foreign exchange markets integration among Brazil, India, Indonesia, South Africa and Turkey. The authors employ cointegration-based tests, vector error correction modeling techniques, and Granger causality tests to examine the long-run and short-run linkages between stock prices and exchange rates. The results of cointegration tests suggest that there is one long-run stationary relationship between the stock indices and the foreign exchange rates. Four of the Fragile Five (excluding Brazil) show that the stock prices are positively associated with exchange rates. Finally, vector error correction estimates lead to miscellaneous results.
Similar
The Impart of Inflation and Exchange Rates on Stock Prices in NigeriaDynamic Linkage amongst Oil, Gold, Exchange Rates and Stock Markets in Africa: Evidence from Volatility of Major African EconomiesForeign Exchange Auction Markets in Sub-Saharan Africa: Dynamic Models for Auction Exchange Rates.The regime-switching behaviour of exchange rates and frontier stock market prices in Sub-Saharan AfricaThe Nexus Between Exchange Rate Volatility and Nigerian Stock Prices: An Egarch ApproachInvestigating the Relationship between Herding Behaviour and Liquidity in the Johannesburg Stock Exchange