 The Causal Relationship Between Stock Prices And Exchange Rates: Panel Granger Causality Evidence From Emerging And Developed MarketsÖnder Büberkökü () Journal of Academic Value Studies, 2019, vol. 3, issue 15, 39-49 Abstract: The financial literature has paid increasing attention to the relationship between stock prices and exchange rates. This study examines the relationship between these variables using a newly developed heterogeneous panel Granger causality test robust to cross-sectional dependency for 21 emerging and 22 developed markets. Panel results show a unidirectional causality relationship between the variables for both emerging and developed markets, running from stock prices to exchange rates. Additionally, in most cases, country-specific results also support the panel results, indicating the same unidirectional causality for 13 emerging markets (approximately 62 %) and 15 developed markets (approximately 68 %). The opposite link is found for only one emerging market. As such, we conclude that the stock-oriented model is valid for most of emerging and developed markets. That is, in both emerging and developed markets, a change in stock markets causes a change in exchange rate markets in most cases. These findings have important policy implications. Keywords: panel Granger causality test; stock prices; exchange rates (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:atj:journl:v:3:y:2019:i:15:p:39-49 DOI: 10.13934/1999.393 Access Statistics for this article More articles in Journal of Academic Value Studies from Journal of Academic Value Studies |
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