Do Exchange Rates Cause Stock Prices, or Vice-Versa? Evidence From Malaysia

Mohd. Fahmi Ghazali, Siti Hajar Samsu, Ooi Ai Yee and Nelson Lajuni

The IUP Journal of Monetary Economics, 2008, vol. VI, issue 3, 6-13

Abstract: The main purpose of this paper is to examine the relationship between stock prices and exchange rates in Malaysia, for the periods immediately before and during the 1997 Asian crisis, and during the currency unpegged period. This research considers high-frequency data of USD-MYR exchange rates and Kuala Lumpur Composite Index (KLSE). The Toda-Yamamoto causality test finds that there was no causality at all during the non-crisis and crisis periods. Nevertheless, the results also reveal that there was an unidirectional causality running from stock prices to exchange rates for the currency unpegged period.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjmo:v:06:y:2008:i:3:p:6-13

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