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Interdependence Between Foreign Exchange Markets and Stock Markets in Selected European Countries

Author

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  • Mevlud Islami

    (University of Wuppertal/European Institute for International Economic Relations (EIIW))

Abstract

In this analysis the interdependence between foreign exchange markets and stock markets for selected accession and cohesion countries is discussed. This includes basic theoretical approaches. Monthly data for the nominal stock market indices and nominal exchange rates are used, where Ireland, Portugal, Spain, Greece, Poland, Czech Republic, Slovenia, and Hungary are included in the analysis. From the cointegration analysis and VAR analysis both long-term links and short-term links for Poland are identified. Conversely, for Slovenia, Hungary, Ireland, and Spain merely short-term links resulted. Surprisingly, the direction of causation is unambiguously from the stock market index to the exchange rate for all six countries considered.

Suggested Citation

  • Mevlud Islami, 2008. "Interdependence Between Foreign Exchange Markets and Stock Markets in Selected European Countries," Schumpeter Discussion Papers sdp08007, Universitätsbibliothek Wuppertal, University Library.
  • Handle: RePEc:bwu:schdps:sdp08007
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    References listed on IDEAS

    as
    1. Oliver Holtemöller, 2005. "Uncovered interest rate parity and analysis of monetary convergence of potential EMU accession countries," International Economics and Economic Policy, Springer, vol. 2(1), pages 33-63, June.
    2. Stavarek, Daniel, 2004. "Stock Prices and Exchange Rates in the EU and the USA: Evidence of their Mutual Interactions," MPRA Paper 7297, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Exchange Rate; Stock Markets; Cointegration; VAR; European Integration;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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