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Impact of the global crisis on the linkages between the interest rates and the stock prices in Romania

  • Stefanescu, Razvan
  • Dumitriu, Ramona

Very often the crisis induces changes in the linkages between the financial variables. This paper explores, through a Vector Autoregression model and Granger Causality tests, the impact of the global crisis on the relation between the Romanian stock prices and the interest rates. We found this relation was very weak before the crisis, when the Romanian stock market experienced an ascendant trend. Instead, it became quite significant during the crisis when the financial markets are very sensitive to the external stimuli and the monetary policy has to take into consideration the impact of interest rates on the stock prices.

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File URL: http://mpra.ub.uni-muenchen.de/36716/1/MPRA_paper_36716.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36716.

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Date of creation: 24 Apr 2010
Date of revision: 16 Feb 2011
Handle: RePEc:pra:mprapa:36716
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  1. Ben S. Bernanke & Kenneth N. Kuttner, 2004. "What explains the stock market's reaction to Federal Reserve policy?," Finance and Economics Discussion Series 2004-16, Board of Governors of the Federal Reserve System (U.S.).
  2. 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.
  3. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  4. Helmut Luetkepohl, 2007. "Econometric Analysis with Vector Autoregressive Models," Economics Working Papers ECO2007/11, European University Institute.
  5. Flannery, Mark J & James, Christopher M, 1984. " The Effect of Interest Rate Changes on the Common Stock Returns of Financial Institutions," Journal of Finance, American Finance Association, vol. 39(4), pages 1141-53, September.
  6. Michael D. Bordo & Michael J. Dueker & David C. Wheelock, 2007. "Monetary policy and stock market booms and busts in the 20th century," Working Papers 2007-020, Federal Reserve Bank of St. Louis.
  7. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
  8. Roberto Rigobon & Brian Sack, 2003. "Measuring The Reaction Of Monetary Policy To The Stock Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 639-669, May.
  9. Blanchard, Olivier J, 1981. "Output, the Stock Market, and Interest Rates," American Economic Review, American Economic Association, vol. 71(1), pages 132-43, March.
  10. Saikkonen, Pentti & L├╝tkepohl, Helmut, 1999. "Testing for a unit root in a time series with a level shift at unknown time," SFB 373 Discussion Papers 1999,72, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  11. Marc D. Hayford & A. G. Malliaris, 2004. "Monetary Policy and the U.S. Stock Market," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 387-401, July.
  12. Lanne, Markku & L├╝tkepohl, Helmut & Saikkonen, Pentti, 2001. "Test procedures for unit roots in time series with level shifts at unknown time," SFB 373 Discussion Papers 2001,39, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  13. Titman, Sheridan & Warga, Arthur, 1989. "Stock Returns as Predictors of Interest Rates and Inflation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(01), pages 47-58, March.
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