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The Dynamic Relationship Between Stock Prices And Exchange Rates: Evidence For Brazil
| Content Provider | Semantic Scholar |
|---|---|
| Author | Tabak, Benjamin Miranda |
| Copyright Year | 2006 |
| Abstract | This paper studies the dynamic relationship between stock prices and exchange rates in the Brazilian economy. We use recently developed unit root and cointegration tests, which allow endogenous breaks, to test for a long run relationship between these variables. We performed linear, and nonlinear causality tests after considering both volatility and linear dependence. We found that there is no long run relationship, but there is linear Granger causality from stock prices to exchange rates, in line with the portfolio approach: stock prices lead exchange rates with a negative correlation. Furthermore, we found evidence of nonlinear Granger causality from exchange rates to stock prices, in line with the traditional approach: exchange rates lead stock prices. We believe these findings have practical applications for international investors and in the design of exchange rate policies. |
| Starting Page | 1377 |
| Ending Page | 1396 |
| Page Count | 20 |
| File Format | PDF HTM / HTML |
| DOI | 10.1142/S0219024906003974 |
| Volume Number | 09 |
| Alternate Webpage(s) | https://www.bcb.gov.br/pec/wps/ingl/wps124.pdf |
| Alternate Webpage(s) | https://doi.org/10.1142/S0219024906003974 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
