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A bivariate causality between stock prices and exchange rates: evidence from recent Asianflu

Listed author(s):
  • Granger, Clive W. J.
  • Huangb, Bwo-Nung
  • Yang, Chin-Wei

This paper applies recently developed unit root and cointegration models to determine the appropriate Granger causality relations between stock prices and exchange rates using recent Asian flu data. Coupled with impulse response functions, it is found that data from Japan and Thailand are in agreement with this approach, so that exchange rates leads stock prices with positive correlation. On the other hand, data of Taiwan suggests the result predicted by the portfolio approach: stock prices lead exchange rates with negative correlation. Data from Indonesia, Korea, Malaysia, and the Philippines indicate strong feedback relations while that of Singapore fails to reveal any recognizable pattern

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File URL: http://www.sciencedirect.com/science/article/pii/S1062-9769(00)00042-9
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Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 40 (2000)
Issue (Month): 3 ()
Pages: 337-354

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Handle: RePEc:eee:quaeco:v:40:y:2000:i:3:p:337-354
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620167

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  1. Dornbusch, Rudiger, 1975. "A portfolio balance model of the open economy," Journal of Monetary Economics, Elsevier, vol. 1(1), pages 3-20, January.
  2. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
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  7. Vogelsang, T.I. & Perron, P., 1991. "Nonstationary and Level Shifts With An Application To Purchasing Power Parity," Papers 359, Princeton, Department of Economics - Econometric Research Program.
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  9. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
  10. Donald W.K. Andrews & Inpyo Lee & Werner Ploberger, 1992. "Optimal Changepoint Tests for Normal Linear Regression," Cowles Foundation Discussion Papers 1016, Cowles Foundation for Research in Economics, Yale University.
  11. Campbell R. Harvey, 1994. "Predictable Risk and Returns in Emerging Markets," NBER Working Papers 4621, National Bureau of Economic Research, Inc.
  12. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
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