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Testing for nonlinearity of the relationship between stock prices and exchange rate in Romania

Author

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  • Saman, Corina

    (Institute for Economic Forecasting, Romanian Academy)

Abstract

The aim of this paper is to test the nonlinearity of the relation between the stock price in Romania and the nominal Romanian Leu against Euro from March 2000 to March 2014. The empirical evidence shows that there is a long-run equilibrium between the two variables during the time period investigated. There exist also short-run relationships that were found to be nonlinear in variables involved (exchange rate and stock price) and also regarding the error correction mechanism.

Suggested Citation

  • Saman, Corina, 2014. "Testing for nonlinearity of the relationship between stock prices and exchange rate in Romania," Working Papers of Institute for Economic Forecasting 141110, Institute for Economic Forecasting.
    • Handle: RePEc:rjr:wpiecf:141110
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    References listed on IDEAS

    as
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    6. Diks, Cees & Panchenko, Valentyn, 2006. "A new statistic and practical guidelines for nonparametric Granger causality testing," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1647-1669.
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    More about this item

    Keywords

    Exchange rates; Stock prices; Causality; Nonlinearity;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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