REAL EXCHANGE RATES AND STOCK PRICES: INSIGHTS INTO THE COMPETITIVENESS OF ROMANIAN ECONOMY (original) (raw)

On the dynamic link between stock prices and exchange rates: evidence from Romania

2007

The theoretical linkages between exchange rates and stock prices are microeconomic as well as macroeconomic in nature and may be observed on the short-and long-run. The paper examines the interactions between the exchange rates and stock prices in Romania, after 1997, taking into account the change in the monetary regime occurred in 2005 -the shift towards inflation targeting. The analysis uses bivariate cointegration and Granger causality tests, applied on daily and monthly exchange rates and stock prices data collected over the 1999 to 2007 period. Three types of exchange rates are used: the nominal effective exchange rates of the Romanian leu, the bilateral nominal exchange rates of the leu against the US dollar and the euro, and the real effective exchange rates of the leu. In terms of stock prices, the BET and BET-C indices of the Bucharest Stock Exchange are used, denominated in the local currency.

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.

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 ...

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.

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...

Cointegration Between Stock Market Indices and Nominal Exchange Rates: Evidence from Transition Countries

ЗБОРНИК РАДОВА ЕКОНОМСКОГ ФАКУЛТЕТА У ИСТОЧНОМ САРАЈЕВУ, 2015

This paper analyzes the interdependence between stock market indices and exchange rates in four transition countries: Croatia, Serbia, Hungary and the Czech Republic. The analysis is based on monthly data for the nominal exchange stock market indices and nominal exchange rates over the period from March 2010 to March 2015. The main objective of this work is to determine whether the exchange rates had a significant impact on future trends in the capital markets and vice versa. Empirical analysis has shown that the series are stationary in the first differences, and using both Engle-Granger cointegration and Granger causality test it has been shown, as well, that there is neither long-run nor short-run relationship between these two variables. In other words, it means that prediction of movement of one variable cannot be based on past values of other variable

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.

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.

Causality between Stock Prices and Exchange Rates in Turkey: Empirical Evidence from the ARDL Bounds Test and a Combined Cointegration Approach

International Journal of Financial Studies

This paper investigates the interaction between stock prices and real exchange rates by applying monthly data from Turkey for the period between January 2001 and September 2016. This study uses the autoregressive distributed lag (ARDL) model and the Error Correction Model (ECM) in order to investigate the existence of a long-run equilibrium relationship between the variables. The evidence reveals that there is a strong long-run cointegration. The robustness of the ARDL bounds test cointegration was confirmed using the newly-developed combined cointegration, which also provided the same evidence for a strong long-run relationship. The Granger causality test results indicate a long-run bidirectional causality between stock prices and real exchange rates, and also a unidirectional causality from the real exchange rates to the stock prices in the short-run. In order to analyze the validity and reliability of the test results, diagnostic tests were applied in both the short-run and long-run models.