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ISE and Exchange Market Pressure

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Author Info
Mete Feridun () (Department of Economics, Loughborough University)

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Abstract

This article aims at investigating the long-run relationship between stock prices and speculative pressure in the Turkish exchange market through Granger-causality analysis for the period 1986:01-2006:11. For this purpose an Exchange Market Pressure Index is built using the weighted average of exchange rate changes, interest rate changes and foreign exchange reserve changes. This index is then used in pairwise causality analyses with Istanbul Stock Exchange (ISE) National-100 Index. Results of the ADF unit root tests suggest that the series are stationary. Hence, no-cointegration analysis was carried out before the Granger-causality tests. Results of Granger-causality indicates that there exists no long-run relationship between stock prices and the speculative pressure in the exchange market in Turkey.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/mferidun_wp1.pdf
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Publisher Info
Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2006_22.

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Date of creation: Dec 2006
Date of revision: Dec 2006
Handle: RePEc:lbo:lbowps:2006_22

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Related research
Keywords: currency crises; stock prices; co-integration; exchange market pressure.;

Find related papers by JEL classification:
F3 - International Economics - - International Finance
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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References listed on IDEAS
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    Other versions:
  2. Friedman, Milton, 1988. "Money and the Stock Market," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 221-45, April. [Downloadable!] (restricted)
  3. Kaminsky, Graciela & Lizondo, Saul & Reinhart, Carmen M., 1997. "Leading indicators of currency crises," Policy Research Working Paper Series 1852, The World Bank. [Downloadable!]
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  4. Hali J. Edison, 2000. "Do indicators of financial crises work? an evaluation of an early warning system," International Finance Discussion Papers 675, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  5. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany. [Downloadable!]
  6. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
    Other versions:
  8. Edin, Per-Anders & Vredin, Anders, 1993. "Devaluation Risk in Target Zones: Evidence from the Nordic Countries," Economic Journal, Royal Economic Society, vol. 103(416), pages 161-75, January. [Downloadable!] (restricted)
    Other versions:
  9. Bahmani-Oskooee, Mohsen & Sohrabian, Ahmad, 1992. "Stock Prices and the Effective Exchange Rate of the Dollar," Applied Economics, Taylor and Francis Journals, vol. 24(4), pages 459-64, April.
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