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Linkages between the stock prices and the exchange rates during the global crisis: the case of Romania

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  • Stefanescu, Razvan
  • Dumitriu, Ramona

Abstract

Since the Asian flu several empirical studies revealed that in the crisis circumstances the relationship between the stock prices and the exchange rates could suffer significant changes. Such findings were confirmed during the global crisis that started in 2008. In the case of Romania the global crisis caused sharp shocks on both the capital market and the foreign exchange market. Contagion from the foreign financial markets and some impulses from the national economy led to complex evolutions of both markets, where ascendant and descendent trends alternated. In this paper we study the interactions between the stock prices and the exchange rates during some distinct stages of the recent crisis. We find that contagion from the foreign financial markets, the exchange rates policy changes and the national economy situation had a major impact on the relationship between the stock prices and the exchange rates.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43350.

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Date of creation: 08 Aug 2011
Date of revision: 22 Oct 2011
Publication status: Published in Proceedings of the 16th International Scientific Conference “Knowledge Based Organization”, Sibiu, 2011 Economic, Social and Administrative Approaches.2(2011): pp. 311-317
Handle: RePEc:pra:mprapa:43350

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Keywords: Global Crisis; Stock Prices; Exchange Rates; Causality;

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  1. Granger, Clive W.J. & Huang, Bwo-Nung & Yang, Chin W., 1998. "A Bivariate Causality between Stock Prices and Exchange Rates: Evidence from Recent Asia Flu," University of California at San Diego, Economics Working Paper Series qt9bk607p6, Department of Economics, UC San Diego.
  2. Caporale, Guglielmo Maria & Pittis, Nikitas & Spagnolo, Nicola, 2002. "Testing for Causality-in-Variance: An Application to the East Asian Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(3), pages 235-45, July.
  3. Smith, C. E., 1992. "Stock markets and the exchange rate: A multi-country approach," Journal of Macroeconomics, Elsevier, vol. 14(4), pages 607-629.
  4. Bartov, Eli & Bodnar, Gordon M, 1994. " Firm Valuation, Earnings Expectations, and the Exchange-Rate Exposure Effect," Journal of Finance, American Finance Association, vol. 49(5), pages 1755-85, December.
  5. Dornbusch, Rudiger & Fischer, Stanley, 1980. "Exchange Rates and the Current Account," American Economic Review, American Economic Association, vol. 70(5), pages 960-71, December.
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