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A Bivariate Causality between Stock Prices and Exchange Rates: Evidence from Recent Asia Flu

UCSD Economics Discussion Paper 98-09

Posted: 20 Aug 1998  

Clive W. J. Granger

University of California, San Diego (UCSD) - Department of Economics; Tinbergen Institute

Bwo-Nung Huang

National Chung Cheng University

Chin Wei Yang

Clarion University - Department of Economics

Date Written: April 1998

Abstract

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

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

Clive W. J. Granger (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-3383 (Phone)
858-534-7040 (Fax)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Bwo-Nung Huang

National Chung Cheng University ( email )

Min-Shiung, Chia-Yi, 621
Taiwan

Chin Yang

Clarion University - Department of Economics ( email )

Clarion, PA 16214
United States
814-226-2609 (Phone)

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