The Relationship Between Stock Prices and Exchange Rates Evidence from Developed and Developing Countries

Onder Buberkoku

Istanbul Stock Exchange Review, 2013, vol. 13, issue 52, 1-16

Abstract: This study analyses the relationship between exchange rates and stock prices in some developed and developing countries, namely Japan, Canada, England, Switzerland, Germany, Australia and Singapore, S. Korea, and Turkey. The study examines the long-run relationship between these market variables by using Johansen (1988) and Engle-Granger (1987) cointegration tests and shortrun dynamic relationship by using Granger causality test, a variance decomposition analysis and an impulse response analysis. The findings indicate that there is uni-directional causality from stock prices to exchange rates in Canada and Switzerland, while no causal relationship is found in Japan, Germany, England, and Australia. Moreover, there is uni-directional causality from exchange rates to stock prices in Singapore and S. Korea, whereas uni-directional causality from stock prices to exchange rates is found in Turkey. These findings are also robust with respect to various methods used. In addition, the results show that there is no long-run relationship between the two examined variables in any studied country except Singapore

Keywords: Stock prices; exchange rates; Johansen (1988); Engle-Granger (1987) cointegration tests; Granger causality; variance decomposition; impulse response analysis; developed countries; developing countries (search for similar items in EconPapers)
JEL-codes: F30 G10 G15 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.borsaistanbul.com/datum/imkbdergi/EN/isereview52.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bor:iserev:v:13:y:2013:i:52:p:1-16

Access Statistics for this article

More articles in Istanbul Stock Exchange Review from Research and Business Development Department, Borsa Istanbul Contact information at EDIRC.
Bibliographic data for series maintained by Ahmet Palu ().