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Stock prices, exchange rates and causality in Malaysia: a note

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Author Info
Azman-Saini, W.N.W.
Habibullah, M.S.
Law, Siong Hook
Dayang-Afizzah, A.M.

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Abstract

This article contributes to the debate on stock prices and exchange rates in Malaysia. It examines causal relations using a new Granger non-causality test proposed by Toda and Yamamoto (Journal of Econometrics, 66, 225-50, 1995). Among the findings of interest, there is a feedback interaction between exchange rates and stock prices for the pre-crisis period. The results also reveal that exchange rates lead stock prices for the crisis period. In a financially liberalized environment, exchange rates stability is important for stock market well-being.

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File URL: http://mpra.ub.uni-muenchen.de/656/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 656.

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Date of creation: Oct 2006
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Handle: RePEc:pra:mprapa:656

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Related research
Keywords: Exchange rates Stock prices Causality Malaysia

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Find related papers by JEL classification:
G1 - Financial Economics - - General Financial Markets
F31 - International Economics - - International Finance - - - Foreign Exchange

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  1. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250. [Downloadable!] (restricted)
  2. Abdalla, Issam S A & Murinde, Victor, 1997. "Exchange Rate and Stock Price Interactions in Emerging Financial Markets: Evidence on India, Korea, Pakistan and the Philippines," Applied Financial Economics, Taylor and Francis Journals, vol. 7(1), pages 25-35, February. [Downloadable!] (restricted)
  3. Moreno, R. & Pasadilla, G. & Remolona, E., 1998. "Asia's Financial Crisis: Lessons and Policy Responses," Papers 98-02, Economisch Institut voor het Midden en Kleinbedrijf-.
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  4. John Wei, K. C. & Liu, Yu-Jane & Yang, Chau-Chen & Chaung, Guey-Shiang, 1995. "Volatility and price change spillover effects across the developed and emerging markets," Pacific-Basin Finance Journal, Elsevier, vol. 3(1), pages 113-136, May. [Downloadable!] (restricted)
  5. DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, vol. 60(2), pages 423-33, March. [Downloadable!] (restricted)
  6. 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)
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  7. Jun Nagayasu, 2000. "Currency Crisis and Contagion - Evidence from Exchange Rates and Sectoral Stock Indices of the Philippines and Thailand," IMF Working Papers 00/39, International Monetary Fund.
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  8. Dornbusch, Rudiger & Fischer, Stanley, 1980. "Exchange Rates and the Current Account," American Economic Review, American Economic Association, vol. 70(5), pages 960-71, December. [Downloadable!] (restricted)
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