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Stock and Foreign Exchange Market Linkages in Emerging Economies

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  • Elena Andreou
  • Maria Matsi
  • Andreas Savvides

Abstract

This paper investigates bi-directional linkages between the stock and foreign exchange markets of a number of emerging economies. A quarto-variate VAR-GARCH model with the BEKK representation is estimated for each of twelve emerging economies to test for spillovers, both in terms of return and volatility, between the emerging stock market, foreign exchange market and global and regional stock markets. We find significant bi-directional spillovers between stock and foreign exchange markets. We also examine the effects of a country’s choice of exchange rate regime, on the one hand, and the Asian financial crisis, on the other, on the volatility spillover mechanism.

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File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/01-13.pdf
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Bibliographic Info

Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 01-2013.

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Length: 41 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:ucy:cypeua:01-2013

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Web page: http://www.econ.ucy.ac.cy

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Keywords: Volatility Spillovers; MGARCH; Emerging Economies;

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