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Stock market and foreign exchange market integration in South Africa

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  • Mitra, Rajarshi

Abstract

The total value of stock transactions in South Africa, in proportion to its GDP, increased from 2.64% in 1979 to 92.72% in 2014. The real effective exchange rate index decreased from 140.57 in 1979 to 77.62 in 2014. The results of empirical studies on the relation between exchange rate and stock transactions are mostly mixed and inconclusive. This paper applies the dynamic cointegration technique to time series data and re-examines the short-run and long-run association between the real effective exchange rate and the total value of stock transactions in South Africa over the post-Bretton Woods period 1979–2014. Results indicate a significantly positive long-run relation between the real effective exchange rate and the total value of stock transactions in South Africa. Results also indicate lack of integration between stock transactions in the U.S. and South Africa.

Suggested Citation

  • Mitra, Rajarshi, 2017. "Stock market and foreign exchange market integration in South Africa," World Development Perspectives, Elsevier, vol. 6(C), pages 32-34.
    • Handle: RePEc:eee:wodepe:v:6:y:2017:i:c:p:32-34
    DOI: 10.1016/j.wdp.2017.05.001
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    9. Afees A. Salisu & Kazeem Isah & Nnenna Ogbonnaya‐Orji, 2022. "A firm level analysis of asymmetric response of U.S. stock returns to exchange rate movements," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1220-1239, January.
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    More about this item

    Keywords

    F31; F41; O55; Cointegration; Exchange rate; Stock index; VECM;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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