Effects of volatility shocks on the dynamic linkages between exchange rate, interest rate and the stock market: The case of Turkey

Şensoy, Ahmet; Sobaci, Cihat

doi:10.1016/j.econmod.2014.09.005

Cited by 44 publications

(26 citation statements)

References 20 publications

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“…Volatile exchange rates make an international trade and investment decisions more difficult because volatility increases an exchange rate risk (Devereux & Engel, 2002;Sensoy & Sobaci, 2014). An exchange rate risk refers to the potential to lose money because of a change in the exchange rate.…”

Section: The Distinction Between Exchange-rate Volatility and Apprecimentioning

confidence: 99%

Exchange rate volatility and industrial output growth in Nigeria

Oseni

Adekunle

Alabi

2019

JEM

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Aim/purpose -This paper examines the relationship between exchange rate volatility and industrial output growth in Nigeria. In spite of the massive revenue emanating from oil wealth, Nigeria has wallowed in intergenerational poverty due to the inability to grow its industrial sector. The dilemma of exchange rate allowed growth of the industrial sector to become enormous. As such, this paper attempts a quantitative analysis of industrial output growth in Nigeria as predicted by an exchange rate volatility using a time series data from the exchange rate and the industry value added from 1986 through 2017. Design/methodology/approach -This paper adopts a quantitative analysis of exchange rate volatility as a predictor of changes in industrial output in Nigeria. Monthly Data on exchange rate from 1986 through 2017 were first analysed to show for their clustering behaviour. Thus, ascertaining whether they are volatile or not. The study employs AR(k)-EGARCH(p,q) models for the calculation of volatility in the growth rate of nominal exchange rates. Then the paper adopts the Auto-Regressive Distributed Lag Approach to account for the long-run and short-run dynamics of industrial output in Nigeria as induced by volatility in the exchange rate for different regimes under the scope.Findings -The findings reveal that the real exchange rate volatility determines industrial production as well as availability of foreign exchange increments arising from the various export drives contributing tremendously to the increase in the industrial output in Nigeria. It is further revealed that the capacity utilisation ratio was low. Research implications/limitations -Established evidence of low capacity utilisation may be due to the epileptic power supply, inadequate technological know-how. As such, the government should maintain a flexible exchange rate system to maximally harness the benefits of growth emanating from the industrial sector. Originality/value/contribution -The paper specifically offers an experimental proof to the underlying relationship between industrial output and exchange rate volatility in Nigeria. Previous studies reviewed in the literature have mostly focused on the growth effect of the exchange rate neglecting the important nexus it shares with the industrial sector (a bedrock of sustainable development).

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Section: The Distinction Between Exchange-rate Volatility and Apprecimentioning

confidence: 99%

Exchange rate volatility and industrial output growth in Nigeria

Oseni

Adekunle

Alabi

2019

JEM

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“…The relationship between the exchange rate and the firm's value, traditionally based on two approaches are flow-oriented approach (Dornbusch and Fischer, 1980) and stock-oriented approach (Branson, 1993;Frankel, 1983 andGavin , 1989), as well as approach based on asset-market which implies weak / no relationship between stock prices and exchange rates, where the exchange rate is treated as an asset whose value is determined by the exchange rate is expected in the future (Sensoy and Sobaci 2014). Based on the Interest Rate Parity (IRP) theory, future expectations on the value of the currency led to a change in interest rates, both the interest rate in domestic currency and interest rates in foreign currencies will also affect the present value of the asset or the company (Nieh and lee, 2002).…”

Section: Exchange Rate Business Risk and Firm's Valuementioning

confidence: 99%

Commodity Prices, Exchange Rates and Investment on Firm's Value Mediated by Business Risk: A Case from Indonesian Stock Exchange

Risman¹,

Salim²,

Sumiati³

et al. 2017

ERSJ

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This paper examines the influence of six commodity prices (Crude Oil, Coal, CPO, Gold, Nickel, Tin), exchange ratesand investment on the firm's value during the period 2010-2014, both directly and indirectly through the mediation of business risk.By applying Common Effect approach for panel data on path analysis model, we found the oil price and exchange rate (USD/IDR) are affect the firm's value, either directly or indirectly through business risk asmediation variable,but business risk does not mediate the effect of the investment on the firm's value.The study's findings support previous research results and evidence of theories, especially about the relationship of commodity prices, exchange rates, risks and value of the company.These results are useful for individual and institutional investors, managers and policy makers.

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“…The widespread adoption of floating exchange rates regimes by many countries and increased integration of the global financial system have encouraged capital flows among countries, and these have evoked researchers" interests to study the link between financial and foreign exchange markets (Phylaktis and Ravazzolo, 2005;Tsai, 2012;Liang et al, 2013;Ndako, 2013;Andrieș et al, 2014;Stillwagon, 2016). Evidence of strong relationship between the two markets is instructive for domestic policy making and portfolio reallocation because shocks to either market may be transmitted quickly to another or to the domestic economy through various contagious channels (Chkili and Nguyen, 2014;Sensoy and Sobaci, 2014;Dahir, et al 2017;Leung et al, 2017). More specifically, arguments from scholars connect equity prices and exchange rates, suggesting that both stock and exchange rate markets are governed by the same set of factors through fund managers" portfolio rebalances (Hau and Rey, 2006;Pavlova and Roberto 2007;Dunne, et al 2010;Ding and Ma, 2013;Wong, 2017).…”

Section: Introductionmentioning

confidence: 99%