Original scientific paper
https://doi.org/10.1080/1331677X.2023.2208635
Do positive and negative variations in stock indexes lead to depreciation in local currencies? A beyond symmetrical evidence from ASEAN-5 region
Mosab I. Tabash
Umaid A. Sheikh
Muzaffar Asad
Ather Azim Khan
Abstract
Preliminary studies overlooked the importance of the financial crisis
in the asymmetric transmission of financial market shocks to FX
market returns. Moreover, existing studies also concentrated on
the response of aggregate equity market returns to the forex market
returns rather than the vice versa asymmetric effect for the
ASEAN-5 region. We utilised the panel based ARDL and NARDL
framework using pooled mean group method for conducting this
study. There are 415 observations spanning the pre-crisis period of
January 2001 to December 2007. Furthermore, 595 and 1135
observations are taken into consideration when post-recessionary,
and overall sampling periods of January 2010 to December 2019
and January 2001 to December 2019 are considered, correspondingly.
Overall, the findings indicated that in the short run, only
negative equity market returns caused depreciation in the local
currencies of ASEAN-5 member countries during the pre-crisis
period, whereas only positive shocks during the post-crisis regime
appreciated the local currencies of ASEAN-5 member countries.
Furthermore, only longer-term negative financial market shocks
contribute to post-crisis local currency deflation in the ASEAN-5
member nations. This demonstrates that investors and exporters
must consider the importance of the particulate crisis period
when formulating forward currency arrangements.
Keywords
ASEAN-5; stock market behaviour; exchange rate; panel based NARDL model; pooled mean group approach (PMG); panel based ARDL
Hrčak ID:
314880
URI
Publication date:
24.5.2023.
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