IDEAS home Printed from https://ideas.repec.org/a/afj/journl/v10y2008i1p1-27.html
   My bibliography  Save this article

Stock Prices and the Exchange Rate in a Monetary Model: A ARDL Bounds Testing Approach Using South African Data

Author

Listed:
  • Smile Dube

    () (California State University)

Abstract

We investigate the empirical validity of the monetary model of the exchange rate (Rand/Dollar=ZAR/$ ) using a technique (ARDL Bounds test) capable of testing for the existence of a long-run relationship regardless of whether the underlying time series are individually I(I) or I(0). Monetary fundamental variables (money supply, income, interest rate) are augmented by the stock market prices. We find evidence supporting the existence of a long-run relationship between the ZAR/$ exchange rate and fundamental variables, including stock prices. With the exception of relative money supplies where, we offer various explanations, all variables have the correct sign and plausible magnitudes.

Suggested Citation

  • Smile Dube, 2008. "Stock Prices and the Exchange Rate in a Monetary Model: A ARDL Bounds Testing Approach Using South African Data," The African Finance Journal, Africagrowth Institute, vol. 10(1), pages 1-27.
  • Handle: RePEc:afj:journl:v:10:y:2008:i:1:p:1-27
    as

    Download full text from publisher

    File URL: http://www.journals.co.za/ej/ejour_finj.html
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Riané de Bruyn & Rangan Gupta & Lardo Stander, 2013. "Testing the Monetary Model for Exchange Rate Determination in South Africa: Evidence from 101 Years of Data," Contemporary Economics, University of Finance and Management in Warsaw, vol. 7(1), March.

    More about this item

    Keywords

    Exchange Rate; Stock Price; ARDL; Cointegration; Bounds Testing; Flexible Price Model (FPM); Sticky Price Model (SPM);

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F30 - International Economics - - International Finance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:afj:journl:v:10:y:2008:i:1:p:1-27. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kirk De Doncker). General contact details of provider: http://edirc.repec.org/data/afrgrza.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.