On the dynamic link between stock prices and exchange rates: evidence from Romania (original) (raw)

REAL EXCHANGE RATES AND STOCK PRICES: INSIGHTS INTO THE COMPETITIVENESS OF ROMANIAN ECONOMY

2007

The paper investigates the dynamic links between stock prices and exchange rates in Romania, after 1997, considering the changes in the exchange rate regime occurred after 1997. The research employs advanced econometric methods – cointegration and Granger causality tests, in order to capture the bi-directional influences between stock prices and exchange rates, applied to monthly data over the 1999-2007 period.

An Empirical Test on Linkage Between Foreign Exchange Market and Stock Market: Evidence from Hungary, Czech Republic, Poland and Romania

The paper aims to examine the causal relationship between the stock prices and exchange rates in Hungary, Czech Republic, Poland and Romania. The investigation employs Granger's Causality test and Vector Auto Regression technique on monthly stock return and the foreign exchange rate for the period October 31, 2008 to September 18, 2017. The major findings of the study that there is no Granger's causality between the exchange rate return and stock return in these countries. The study also uses Vector Auto Regression modeling to confirm that though stock return and exchange rate are related to each other but any consistent relationship does not exist between them. Our results have provided beneficial information for investors, government policies and researchers.

Relationship between Foreign Exchange Rate and Stock Price of Commercial Banks in Romanian financial market

2018

In the context of globalization and the financial crisis that the world traversed over the period 2007-2009, the Romanian capital market suffered extreme shocks (stock indices recording a decline of up to 90% while the national currency depreciated sharply against EUR and USD), which led to a significant increase in volatility in the national financial market. Considering that the financial sector was the trigger of the crisis and one of the most affected sector, we chose to analyze whether we can talk about the foreign exchange rate impact on price of the bank shares traded on the Bucharest Stock Exchange and vice versa (during March 2008 -June 2017), using correlation and VAR Granger Causality test. Frequency of data is daily. We also studied the evolution of the correlation between the banking sector (represented bythe shares of the banking companies traded on the Bucharest Stock Exchange) and the foreign exchange market during and after the financial crisis.Next, we analyzed vol...

Impact of the Global Crisis on the Financial Linkages between the Stock Market and the Foreign Exchange Market from Romania

2009

This paper explores the financial linkages between the Romanian stock market and the exchange market in the context of the global crisis. We investigate such relations for two periods of time: one from January 2006 to February 2008, when the Romanian financial markets were quite tranquil and the other from March 2008 to September 2009, while the global crisis effects were considerable for Romania. For the first period of time we could not prove significant relations between the foreign exchange market and the stock market. Instead, for the second period of time we found a unidirectional causality from the exchange rates to the stock prices.

The Dynamic Relationship Between Stock Prices and Exchange Rates: Evidence from Four Transition Economies

2007

This article examines the dynamic relationship between exchange rates and stock prices in four Easter European markets, Czech Republic, Hungary, Poland and Slovakia, using stock price and exchange rate data from these countries, as well as stock prices from the United States, Germany and the United Kingdom. The data set consists of daily data over a 7 year period from 1999 to 2006. Both the long-run and the short-run association between these variables are analyzed.

The Comovement of Exchange Rates and Stock Markets in Central and Eastern Europe

Sustainability

This paper analyses the link between exchange rates and stock markets in four Central and Eastern European countries. We simultaneously explore the comovements of foreign exchange markets and stock markets at the cross-country level and the link between these two markets within each country while employing a Dynamic Conditional Correlation Mixed Data Sampling (DCC-MIDAS) model. Such an approach to financial markets conveys a much more visible picture of the existing patterns of financial integration between these markets that would otherwise be neglected. The estimates reveal significant differences between the patterns of correlation in our sample countries. First, the paper finds a quite low degree of convergence between foreign exchange markets, with rising correlations during some of the crisis episodes. Second, both the 2004 European Union enlargement and the European sovereign debt crisis underpin the stock market comovements in the Central and Eastern European countries. Thir...

Dynamic relationship between stock prices and exchange rates for G-7 countries

The Quarterly Review of Economics and Finance, 2002

This paper studies the dynamic relationship between stock prices and exchange rates in the Brazilian economy. We use recently developed unit root and cointegration tests, which allow endogenous breaks, to test for a long run relationship between these variables. We performed linear, and nonlinear causality tests after considering both volatility and linear dependence. We found that there is no long-run relationship, but there is linear Granger causality from stock prices to exchange rates, in line with the portfolio approach: stock prices lead exchange rates with a negative correlation. Furthermore, we found evidence of nonlinear Granger causality from exchange rates to stock prices, in line with the traditional approach: exchange rates lead stock prices. We believe these findings have practical applications for international investors.

Interactions between the Exchange Rates and the Differential of the Stock Returns between Romania and US during the Global Crisis

Economics and Applied Informatics, 2011

The relation between the foreign exchange markets and the stock markets is still a controversial subject in the specialized literature. Recent studies revealed the changes that occur in this relation during the financial crisis. In this paper we approach the interactions between the exchange rates and the differentials of the stock returns between Romania and the US in the period of the global crisis. We find some significant differences in this relations during the main stages of the crisis.

Cointegration analysis of stock market index and exchange rate: The case of Serbian economy

Anali Ekonomskog fakulteta u Subotici, 2021

Since the late 90's, the existence and direction of causality between the capital market and foreign exchange market have attracted significant attention of theoretical and empirical researchers. This is because both of these financial variables have an indisputable role in the development of each country's economy. In this paper we use Johansen procedure and Granger causality test to examine the existence and direction of short-run and long-run dynamics between the leading stock market index BELEX15 and RSD/EUR exchange rate in Serbia. Using ADF test we find that both series are integrated of order one, and since the value of Johansen trace statistics confirmed the existence of cointegration, we have proceeded with estimation of the VECM model. According to our VECM model, the BELEX15 index adjusts to the long-run equilibrium relationship at a rate of 11.72% in each period, while the exchange rate adjusts to the long-run equilibrium relationship at a rate of 2.73%. We also ...

Dynamic Nexus between Exchange Rate and Stock Prices in the Major East European Economies

Prague Economic Papers, 2016

This paper investigates the dynamic conditional correlation (DCC) between stock returns and exchange rate in four East European emerging markets. Due to persistent long memory and the presence of the asymmetric effect in all asset markets we applied DCC-FIAPARCH model. The estimated negative DCC parameters in all scrutinized countries confirmed that portfoliobalanced theory has predominance in the short run in all selected economies. DCC parameters revealed significant time-varying behaviour, especially during the major crisis periods. By embedding dummy variables in the variance equations, we came to the conclusion that global shocks affect the volatility of DCCs. Particularly, it happened during the Global Financial Crisis and European sovereign debt crisis, but the effects were not linearly equal in all countries. Complementary rolling analysis unveils how conditional volatilities of analysed assets influence DCC. The results suggested that exchange rate conditional volatility ha...