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Causal Relationships Between Exchange Rates And Stock Prices In Malaysia And Thailand During The 1997 Currency Crisis Turmoil

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Author Info

  • Huzaimi Hussain

    (Universiti Teknologi MARA Malaysia)

  • Venus Khim-Sen Liew

    (Universiti Putra Malaysia)

Abstract

Using Granger (1969), Sim (1972) and Geweke et al. (1982) causality tests, this study finds a feedback causal relationship between exchange rate and stock price in Malaysia, whereas a unidirectional causal relationship running from exchange rate to stock price in Thailand. The stock markets of these countries are also found to be closely linked, with a feedback causal relationship between them. Most importantly, this study is able to identify the path through which the fall in Thai baht was transmitted to Malaysian ringgit plunge during the 1997 Currency Crisis turmoil.

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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0405015.

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Length: 20 pages
Date of creation: 09 May 2004
Date of revision:
Handle: RePEc:wpa:wuwpif:0405015

Note: Type of Document - doc; pages: 20
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Web page: http://128.118.178.162

Related research

Keywords: Granger causality; exchange rates; stock prices; Malaysia; Thailand.;

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References

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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. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September.
  3. 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.
  4. Baharumshah, Ahmad Zubaidi & M. Masih, A. Mansur & Azali, M., 2002. "The stock market and the ringgit exchange rate: a note," Japan and the World Economy, Elsevier, vol. 14(4), pages 471-486, December.
  5. 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.
  6. 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.
  7. Ajayi, Richard A & Mougoue, Mbodja, 1996. "On the Dynamic Relation between Stock Prices and Exchange Rates," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 19(2), pages 193-207, Summer.
  8. 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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Cited by:
  1. Stefanescu, Razvan & Dumitriu, Ramona, 2013. "Impact of the foreign exchange rates fluctuations on returns and volatility of the Bucharest Stock Exchange," MPRA Paper 47229, University Library of Munich, Germany, revised 04 Apr 2013.

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