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Relationship Between Exchange Rates and Stock Prices in Transition Economies Evidence from Linear and Nonlinear Causality Tests

Author

Listed:
  • Gunay Akel

    (Necmettin Erbakan University)

Abstract

The existence of causation linkage between stock prices and exchange rates is one of the popular debate especially since the beginning of 1990s. The aim of this paper is to investigate the nature of the causal transmission mechanism between foreign exchange and stock markets in 9 transition countries (i.e., Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Russia) for the periods of 1995-2011. The results of the paper show that uni-directional linear Granger causality running from exchange rates to stock prices for 4 countries (i.e., Czech Republic, Hungary, Poland, and Romania) and a feedback exists between two markets for only Russia when both linear and nonlinear Granger causality are used.

Suggested Citation

  • Gunay Akel, 2014. "Relationship Between Exchange Rates and Stock Prices in Transition Economies Evidence from Linear and Nonlinear Causality Tests," Proceedings of Economics and Finance Conferences 0401783, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:0401783
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    File URL: https://iises.net/proceedings/2nd-economics-finance-conference-vienna/table-of-content/detail?cid=4&iid=1&rid=1783
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    References listed on IDEAS

    as
    1. Issam Abdalla & Victor Murinde, 1997. "Exchange rate and stock price interactions in emerging financial markets: evidence on India, Korea, Pakistan and the Philippines," Applied Financial Economics, Taylor & Francis Journals, vol. 7(1), pages 25-35.
    2. Richard A. Ajayi & Mbodja Mougouė, 1996. "On The Dynamic Relation Between Stock Prices And Exchange Rates," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 19(2), pages 193-207, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Jana Šimáková & Nikola Rusková, 2017. "Role of the Exchange Rates in the Stock Price Development of Companies in Chemical Industry," Working Papers 0042, Silesian University, School of Business Administration.
    2. Mariia Bondarenko & Karel Brůna, 2021. "The Impact of FX Exposure on the Firm's Stock Market Return," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2021(1), pages 45-70.
    3. Gözde YILDIRIM, Zafer ADALI, 2018. "Linear and Non-Linear Causality Tests of Stock Price and Real Exchange Rate Interactions in Turkey," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 1.

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    More about this item

    Keywords

    Exchange Rates; Stock Prices; Transition Economies; Linear and Nonlinear Causality Tests;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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