Stock Prices and Exchange Rate Dynamics

40 Pages Posted: 18 Dec 2000

See all articles by Fabiola Ravazzolo

Fabiola Ravazzolo

City University London

Kate Phylaktis

City University London - Sir John Cass Business School

Date Written: 2000

Abstract

We study the long-run and short-run dynamics between stock prices and exchange rates and the channels through which exogenous shocks impact on these markets. We apply the analysis to a group of Pacific Basin countries and examine whether foreign exchange controls and the Asian financial crisis of mid 1997 affected the links between the markets. The evidence shows that the US stock market acts as a conduit through which the foreign exchange market and the local stock markets are linked. It also provides support for a close relationship between financial and economic integration. Finally, the evidence shows that the financial crisis had a temporary effect on the long-run comovement between the various markets.

Keywords: Stock markets, foreign exchange markets, capital market integration, Asian financial crisis, and Pacific Basin capital markets

JEL Classification: F21, F31, F36

Suggested Citation

Ravazzolo, Fabiola and Phylaktis, Kate, Stock Prices and Exchange Rate Dynamics (2000). EFMA 2000 Athens; Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=251296 or http://dx.doi.org/10.2139/ssrn.251296

Fabiola Ravazzolo

City University London ( email )

Frobisher Crescent
Barbican Centre
London, EC1V OHB
United Kingdom
(44) 171 477 8881 (Fax)

Kate Phylaktis (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 70408735 (Phone)
+44 20 70408881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/k.phylaktis/

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