Original scientific paper
https://doi.org/10.1080/1331677X.2017.1311222
A note on the interaction between stock prices and exchange rates in Middle-East economies
Parham Parsva
Chor Foon Tang
Abstract
Ample studies have been conducted to analyse the interaction
between stock prices and exchange rates in developed and
developing countries. However, studies on Middle-East economies are
limited. Moreover, many existing studies test for Granger causality in
a bi-variate setting which in turn leads to conflicting causality results.
The goal of this study is to investigate the causal interaction between
stock prices and exchange rates empirically in Iran, Kuwait, Oman
and Saudi Arabia from January 2004 to December 2011. Among four
Middle-East economies, we find that stock prices and exchange rates
have bi-directional causality in Iran, Oman and Saudi Arabia, but the
variables do not interact in Kuwait. Additionally, the recursive causality
tests reveal that these relationships are stable over the analysis period.
Therefore, stock prices and exchange rates affect each other at least
in Iran, Oman and Saudi Arabia.
Keywords
Exchange rates; stock prices; recursive causality; Middle-East
Hrčak ID:
182571
URI
Publication date:
1.12.2017.
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