UCSD Economics Discussion Paper 98-09
Posted: 20 Aug 1998
Date Written: April 1998
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.
JEL Classification: G15, C32
Suggested Citation: Suggested Citation
Granger, Clive W. J. and Huang, Bwo-Nung and Yang, Chin Wei, A Bivariate Causality between Stock Prices and Exchange Rates: Evidence from Recent Asia Flu (April 1998). UCSD Economics Discussion Paper 98-09. Available at SSRN: https://ssrn.com/abstract=106509