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Real Exchange Rates And Stock Prices: Insights Into The Competitiveness Of Romanian Economy

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Author Info

  • Alexandra Horobet

    ()
    (Academy of Economic Studies)

  • Livia Ilie

    ()
    (Lucian Blaga University of Sibiu, Faculty of Economic Sciences)

Abstract

The paper investigates the dynamic links between stock prices and exchange rates in Romania, after 1997, considering the changes in the exchange rate regime occurred after 1997. The research employs advanced econometric methods – cointegration and Granger causality tests, in order to capture the bi-directional influences between stock prices and exchange rates, applied to monthly data over the 1999-2007 period. We use two types of exchange rates: nominal effective exchange rates and real effective exchange rates, aiming at revealing the competitiveness effects embedded in the real exchange rate evolution. In terms of stock prices, we use the BET and BET-C indices of the Bucharest Stock Exchange. We conclude that there is a long-term equilibrium relationship between the stock market performance and the nominal and real effective exchange rates, while the information is generally transmitted from the stock prices to exchange rates with a one-month lag in the case of cointegrated variables. Also, the exchange rates are the leading variables for the stock prices and the stock market adjusts quite dramatically to changes in the exchange rates in one month time in the case of cointegrated variables.

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File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/224horobet&ilie.pdf
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Bibliographic Info

Article provided by Lucian Blaga University of Sibiu, Faculty of Economic Sciences in its journal Studies in Business and Economics.

Volume (Year): 2 (2007)
Issue (Month): 2 (October)
Pages: 30-40

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Handle: RePEc:blg:journl:y:2007:v:2:p:30-40

Contact details of provider:
Postal: Lucian Blaga University of Sibiu, Faculty of Economic Sciences Dumbravii Avenue, No 17, postal code 550324, Sibiu, Romania
Phone: 004 0269 210375
Fax: 004 0269 210375
Email:
Web page: http://economice.ulbsibiu.ro/
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Related research

Keywords: exchange rates; stock exchange; cointegration; Granger causality; competitiveness;

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Cited by:
  1. Alexandra HOROBET & Livia ILIE, 2009. "On The Exchange Rate Risk Contribution To The Performance Of International Investments: The Case Of Romania," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 3, pages 57-83, May.

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