Causality and dynamic relationships between exchange rate and stock market indices in BRICS countries: Panel/GMM and ARDL analyses

Artikel

Purpose - This paper aims to investigate simultaneously the causality and the dynamic links between exchange rates and stock market indices. It attempts to identify the short- and long-term effect of the US dollar on major stock market indices of Brazil, Russia, India, China and South-Africa (BRICS) nations. Design/methodology/approach - This paper applies a new methodology combining the panel generalized method of moments model and the panel auto-regressive distributed lag (ARDL) method to investigate the existence of a causal short-/long-run relationships and dynamic dependence among all stock market returns and exchanges rates changes of BRICS countries. Findings - Results show that exchange rate changes have a significant effect on the past and the current volatility of the BRICS stock indices. Besides, ARDL estimations reveal that exchange rate movements have a significant effect on short- and long-term stocks market indices of all BRICS countries Originality/value - The findings have implications for policymakers and market participants who try to manage the exchange rate will have a different dose of intervention if they know that the effects of currency depreciation are different than appreciation. These results have important implications that investors should take into account in frequency-varying exchange rates and stock returns and regulators should consider developing sound policy measures to prevent financial risk.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Economics, Finance and Administrative Science ; ISSN: 2218-0648 ; Volume: 25 ; Year: 2020 ; Issue: 50 ; Pages: 395-412 ; Bingley: Emerald Publishing Limited

Classification and Topics

• Classification: Wirtschaft
• Subject: ARDL method ; BRICS ; Co-movement ; Dynamic panel/GMM ; Exchange rate ; Stock markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mroua, Mourad ; Trabelsi, Lotfi
• Event: Veröffentlichung
• (who): Emerald Publishing Limited
• (where): Bingley
• (when): 2020

Further information

• DOI: doi:10.1108/JEFAS-04-2019-0054
• Handle: http://hdl.handle.net/10419/253803
• Last update: 10.03.2025, 11:42 AM CET