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Exchange rates and stock prices interaction during good and bad times: evidence from the ASEAN4 countries

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  • Abdulnasser Hatemi-J
  • Eduardo Roca

Abstract

Using bootstrap causality tests with leveraged adjustments, the link between exchange rates and stock prices in Malaysia, Indonesia, Philippines and Thailand is investigated for the periods immediately before and during the 1997 Asian crisis. Two variables are found to be significantly linked in the non-crisis period but not at all during the crisis period. The implications of this result in terms of hedging, market efficiency, market integration and policy intervention are explained in the paper.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100500056635
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 15 (2005)
Issue (Month): 8 ()
Pages: 539-546

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Handle: RePEc:taf:apfiec:v:15:y:2005:i:8:p:539-546

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References

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  4. Granger, Clive W. J. & Huangb, Bwo-Nung & Yang, Chin-Wei, 2000. "A bivariate causality between stock prices and exchange rates: evidence from recent Asianflu," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(3), pages 337-354.
  5. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
  6. Hatemi-J, Abdulnasser, 2004. "Multivariate tests for autocorrelation in the stable and unstable VAR models," Economic Modelling, Elsevier, vol. 21(4), pages 661-683, July.
  7. R. Scott Hacker & Abdulnasser Hatemi-J, 2005. "A test for multivariate ARCH effects," Applied Economics Letters, Taylor & Francis Journals, vol. 12(7), pages 411-417.
  8. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  9. Issam Abdalla & Victor Murinde, 1997. "Exchange rate and stock price interactions in emerging financial markets: evidence on India, Korea, Pakistan and the Philippines," Applied Financial Economics, Taylor & Francis Journals, vol. 7(1), pages 25-35.
  10. R. Scott Hacker & Abdulnasser Hatemi-J, 2006. "Tests for causality between integrated variables using asymptotic and bootstrap distributions: theory and application," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1489-1500.
  11. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  12. A. Hatemi-J, 2003. "A new method to choose optimal lag order in stable and unstable VAR models," Applied Economics Letters, Taylor & Francis Journals, vol. 10(3), pages 135-137.
  13. R. Smyth & M. Nandha, 2003. "Bivariate causality between exchange rates and stock prices in South Asia," Applied Economics Letters, Taylor & Francis Journals, vol. 10(11), pages 699-704.
  14. Hatemi-J, Abdulnasser & Irandoust, Manuchehr, 2002. "On the Causality between Exchange Rates and Stock Prices: A Note," Bulletin of Economic Research, Wiley Blackwell, vol. 54(2), pages 197-203, April.
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Citations

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Cited by:
  1. Abdulnasser Hatemi-J & Eduardo Roca, 2010. "The Impact of the US Real Estate Market on Other Major Markets During Normal and Crisis Periods," Discussion Papers in Finance finance:201003, Griffith University, Department of Accounting, Finance and Economics.
  2. Guglielmo Maria Caporale & John Hunter & Faek Menla Ali, 2013. "On the Linkages between Stock Prices and Exchange Rates: Evidence from the Banking Crisis of 2007-2010," CESifo Working Paper Series 4189, CESifo Group Munich.
  3. Hatemi-J, Abdulnasser & Roca, Eduardo, 2011. "How globally contagious was the recent US real estate market crisis? Evidence based on a new contagion test," Economic Modelling, Elsevier, vol. 28(6), pages 2560-2565.
  4. Abdulnasser Hatemi-J & R. Scott Hacker, 2005. "An alternative method to test for contagion with an application to the Asian financial crisis," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(6), pages 343-347, November.
  5. Dogru, Bülent & Recepoglu, Mursit, 2013. "Türki̇ye’De Hi̇sse Senedi̇ Fi̇yatlari Ve Dövi̇z Kuru Arasinda Doğrusal Ve Doğrusal Olmayan Eş Bütünleşme İli̇şki̇si̇
    [Linear and Nonlinear Cointegration Relationship between St
    ," MPRA Paper 50505, University Library of Munich, Germany.
  6. R. Scott Hacker & Abdulnasser Hatemi-J, 2006. "Tests for causality between integrated variables using asymptotic and bootstrap distributions: theory and application," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1489-1500.
  7. Liang, Chin-Chia & Lin, Jeng-Bau & Hsu, Hao-Cheng, 2013. "Reexamining the relationships between stock prices and exchange rates in ASEAN-5 using panel Granger causality approach," Economic Modelling, Elsevier, vol. 32(C), pages 560-563.
  8. Tomoe Moore, 2007. "Has entry to the European Union altered the dynamic links of stock returns for the emerging markets?," Applied Financial Economics, Taylor & Francis Journals, vol. 17(17), pages 1431-1446.

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