EXCHANGE RATE AND STOCK MARKET INTERACTIONS: EVIDENCE FROM AN EMERGING ECONOMY
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This study explores the causal link and its ramifications between the Greek stock market and two Greek exchange rate· vis-ii-vis the US. dollar and the German Mark. Preliminary statistical results how that the series are stationary in their first differences and that they are cointegrated. Hence, an error-correction model is appropriate for explaining the short- and long-term paths of adjustment lo equilibrium simultaneously. The empirical results ilidicate that significantfeedback relations between the dynamics ofthe stock market and each exchange rate exist. These findings have serious implications for Greeces stock market in light ofits way qf becoming more integrated with its European partners within the European Union.
Abstract
This study explores the causal link and its ramifications between the Greek stock market and two Greek exchange rate· vis-ii-vis the US. dollar and the German Mark. Preliminary statistical results how that the series are stationary in their first differences and that they are cointegrated. Hence, an error-correction model is appropriate for explaining the short- and long-term paths of adjustment lo equilibrium simultaneously. The empirical results ilidicate that significantfeedback relations between the dynamics ofthe stock market and each exchange rate exist. These findings have serious implications for Greeces stock market in light ofits way qf becoming more integrated with its European partners within the European Union.