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ISE and Exchange Market Pressure

  • Mete Feridun

    ()

    (Department of Economics, Loughborough University)

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    This article aims at investigating the long-run relationship between stock prices and speculative pressure in the Turkish exchange market through Granger-causality analysis for the period 1986:01-2006:11. For this purpose an Exchange Market Pressure Index is built using the weighted average of exchange rate changes, interest rate changes and foreign exchange reserve changes. This index is then used in pairwise causality analyses with Istanbul Stock Exchange (ISE) National-100 Index. Results of the ADF unit root tests suggest that the series are stationary. Hence, no-cointegration analysis was carried out before the Granger-causality tests. Results of Granger-causality indicates that there exists no long-run relationship between stock prices and the speculative pressure in the exchange market in Turkey.

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    File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/mferidun_wp1.pdf
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    Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2006_22.

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    Date of creation: Dec 2006
    Date of revision: Dec 2006
    Handle: RePEc:lbo:lbowps:2006_22
    Contact details of provider: Postal: Loughborough, Leicestershire, LE11 3TU
    Phone: +44 (0) 1509 222701
    Fax: +44 (0) 1509 223910
    Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html

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    1. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
    2. Reinhart, Carmen & Kaminsky, Graciela & Lizondo, Saul, 1998. "Leading Indicators of Currency Crises," MPRA Paper 6981, University Library of Munich, Germany.
    3. Friedman, Milton, 1988. "Money and the Stock Market," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 221-45, April.
    4. Eliasson, Ann-Charlotte & Kreuter, Christof, 2001. "On crisis models: An alternative crisis definition," Research Notes 01-1, Deutsche Bank Research.
    5. Hali J. Edison, 2003. "Do indicators of financial crises work? An evaluation of an early warning system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(1), pages 11-53.
    6. Edin, P.A. & Vredin, A., 1991. "Devaluation Risk in Target Zones: Evidence from the Nordic Countries," Papers 1991g, Uppsala - Working Paper Series.
    7. Granger, Clive W. J. & Huangb, Bwo-Nung & Yang, Chin-Wei, 2000. "A bivariate causality between stock prices and exchange rates: evidence from recent Asianflu," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(3), pages 337-354.
    8. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
    9. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany.
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