Do Financial Crises Matter for Nonlinear Exchange Rate and Stock Market Cointegration? A Heterogeneous Nonlinear Panel Data Model with PMG Approach

Mosab I. Tabash (), Umaid A. Sheikh, Ali Matar, Adel Ahmed and Dang Khoa Tran
Additional contact information
Mosab I. Tabash: Department of Business Administration, College of Business, Al Ain University, Al Ain P.O. Box 64141, United Arab Emirates
Umaid A. Sheikh: Faculty of Management Studies, University of Central Punjab, Lahore 54000, Pakistan
Ali Matar: College of Administrative Sciences, Applied Science University, East Al-Ekir P.O. Box 5055, Bahrain
Adel Ahmed: Amity Business School, Amity University Dubai, Dubai International Academic City, Dubai P.O. Box 345019, United Arab Emirates
Dang Khoa Tran: Institute of Business Research, University of Economics Ho Chi Minh City, Ho Chi Minh City 700000, Vietnam

IJFS, 2022, vol. 11, issue 1, 1-22

Abstract: The existing literature has explained the causality flow from the exchange rates toward the stock market without explaining the role of the economic crisis in effecting this nexus. This study examines the role of the financial crisis in affecting the nonlinear causality flowing from the exchange rates toward the stock market indexes of the ASEAN-5 region. The precrisis, postcrisis, and overall sample duration comprised 365, 650, and 1085 observations over the periods from January 2002 to January 2008, January 2010 to January 2020, and January 2002 to January 2020, respectively. The results showed that the conventional symmetrical panel ARDL (PARDL) model was not able to formulate long-run cointegration between currency value fluctuations and stock market indexes for both regimes, i.e., the post recessionary and pre recessionary periods. However, asymmetrical cointegration was established between the currency values and stock market indexes for the pre recessionary period and the overall sampling time frame by utilizing the panel-based NARDL framework (PNARDL). The study suggests practical implications for the exporters and importers to consider the regime as well as both the negative and positive shocks in the international dollar values while making forward contractual agreements.

Keywords: stock indexes; exchange rate; heterogeneous nonlinear panel ARDL model; Hsiao test of heterogeneity; asymmetrical Granger causality; global financial crisis 2008 (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7072/11/1/7/pdf (application/pdf)
https://www.mdpi.com/2227-7072/11/1/7/ (text/html)

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:gam:jijfss:v:11:y:2022:i:1:p:7-:d:1013394

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().