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The Effect of the Change in the Exchange Rate of US Dollars on the Market Index of Developing Countries: January 2001– November 2006 Period

Semra Karacaer and Yusuf Volkan Topuz

Istanbul Stock Exchange Review, 2009, vol. 11, issue 42, 1-18

Abstract: In this study, we examine the effect of the change in the exchange rate of US Dollars on the market index of 20 developing countries for the period between January 2001 to November 2006 with regression analysis. In adition, this study also compares the effect of the decrease in US Dollars interest rate by the state bank of America in the period from January 2001 to May 2004 and increase in interest rate for the period from June 2004 to November 2006. In other words, we investigate this effect in two different periods separately. As a result, when we look at the change in exchange rate and its effect on each country’s market index, we found that change in exchange rate effect significantly the market index of 11 countries. This study also found that the decrease in interest rate by FED effect significantly in 9 countrry’s market index and inrease in interest rate effect significantly in 7 countries. According to lag effect of US Dollar change, it is noticed that significant effect was found after 1 and 3 months in four countries.

Keywords: Exchange rate exposure; FED interest rate; Exposure of exchange rate on stock; Developing countries; Lagged effect. (search for similar items in EconPapers)
JEL-codes: F31 G10 O57 (search for similar items in EconPapers)
Date: 2009
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Handle: RePEc:bor:iserev:v:11:y:2009:i:42:p:1-18