Financial market integration, stock markets and exchange rate dynamics in Eastern Europe

Islami, Mevlud; Welfens, Paul J. J.

doi:10.1007/s10368-013-0229-8

Cited by 11 publications

(9 citation statements)

References 36 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…However, we observe an upward trend in DCC for most countries over the time span from 2007 to 2013, implying increased comovement dependence. This observation is consistent with Islami and Welfens [75] and Lee, et al [76], who analyze the links between the stock and currency markets in the Czech Republic, Poland, and Hungary, and find significant levels of correlation in all the considered countries. Moreover, a very interesting feature is the jump in the high-frequency correlations that emerge for all the countries during the crisis episodes, when a series of important events occur.…”

Section: Comovements Of Stock Marketssupporting

confidence: 91%

“…They find that a significant portion of the stock market-exchange rate comovement is due to global developed market returns, while the sign of this relationship is driven by the dependence on foreign capital and depth of the local stock market. Islami and Welfens [75] show that there are significant short-term links between the stock market index and the foreign exchange rate for Hungary, Slovenia, and Poland, while both long-term and short-term links exist for Poland. Additionally, their results highlight that the integration of the stock markets in Eastern European countries seems to be rather week, except for the Hungarian stock market.…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

The Comovement of Exchange Rates and Stock Markets in Central and Eastern Europe

2019

View full text Add to dashboard Cite

This paper analyses the link between exchange rates and stock markets in four Central and Eastern European countries. We simultaneously explore the comovements of foreign exchange markets and stock markets at the cross-country level and the link between these two markets within each country while employing a Dynamic Conditional Correlation Mixed Data Sampling (DCC-MIDAS) model. Such an approach to financial markets conveys a much more visible picture of the existing patterns of financial integration between these markets that would otherwise be neglected. The estimates reveal significant differences between the patterns of correlation in our sample countries. First, the paper finds a quite low degree of convergence between foreign exchange markets, with rising correlations during some of the crisis episodes. Second, both the 2004 European Union enlargement and the European sovereign debt crisis underpin the stock market comovements in the Central and Eastern European countries. Third, the correlations between the exchange rate returns and stock markets rise mostly during the European sovereign debt crisis and to a lesser extent during the global financial crisis, revealing signs of contagion and lower portfolio diversification opportunities. These results are of utmost relevance for the process of financial integration and they also have important implications for policy makers, risk management, and investors.

show abstract

Section: Comovements Of Stock Marketssupporting

confidence: 91%

Section: Literature Reviewmentioning

confidence: 99%

The Comovement of Exchange Rates and Stock Markets in Central and Eastern Europe

2019

View full text Add to dashboard Cite

show abstract

“…Further, the inflow of capital causes appreciation of home currency under a flexible exchange rate system. However, under a fixed exchange rate system, the inflow of capital translates into an inflationary rise of the money supply via the central bank's intervention (Islami & Welfens, 2013). During Covid-19, the governments of many countries have increased the money supply by changing monetary policy to counter the negative consequence of Covid-19 (Aref-Adib & Martin, 2020).…”

Section: Theories Of Exchange Rate and Covid-19mentioning

confidence: 99%

“…Aloui (2021) reveals that during Covid-19, the effect of monetary policy intervention by the Eurozone government in the form of Quantitative Easing on the Euro/USD exchange rate varies over time. Islami and Welfens (2013) show that stock market dynamics also affect exchange rate because domestic stock market performance in comparison to other stock markets causes inflow and outflow of capital, leading to the fluctuation in the exchange rate. In this regard, on studying how the real effect of Covid-19 gets amplified through financial channels, Ramelli and Wagner (2020) document that investors remain bearish to US stocks with exposure to China and the international market.…”

Section: Empirical Studies On Covid-19 and Exchange Ratementioning

confidence: 99%

Economic Consequences of Covid-19 Pandemic: An Analysis of Exchange Rate Behaviour

Sethi

Dash

Swain

et al. 2021

OMEE

View full text Add to dashboard Cite

This paper examines the effect of Covid-19 on currency exchange rate behaviour by taking a sample of 37 countries over a period from 4th January 2020 to 30th April 2021. Three variables, such as daily confirmed cases, daily deaths, and the world pandemic uncertainty index (WPUI), are taken as the measure of Covid-19. By applying fixed-effect regression, the study documents that the exchange rate behaves positively to the Covid-19 outbreak, particularly to daily confirmed cases and daily deaths, which implies that the value of other currencies against the US dollar has been depreciated. However, the impact of WPUI is insignificant. On studying the time-varying impact of the pandemic, the study reveals that the Covid-19 has an asymmetric impact on exchange rate over different time frames. Further, it is observed that though daily confirmed cases and daily deaths show a uniform effect, WPUI puts an asymmetric effect on the exchange rate owing to the nature of economies.

show abstract

“…A common evidence in the post-crisis empirical literature is the reversal observed in financial market integration in European Union countries as a consequence of the crises of 2008 and 2010 (Pungulescu 2013). This phenomenon is also known as weak integration (Islami and Welfens, 2013) or even estrangement (Răileanu-Szeles and Albu, 2015). However, the most recent studies show signs of recovery in financial integration, for example, based on evidence from Eurozone markets (ECB, 2016).…”

Section: Literature Reviewmentioning

confidence: 99%

European Financial Market Integration: A Closer Look at Government Bonds in Eurozone Countries

2020

View full text Add to dashboard Cite

This research aims to test the interdependencies between the Eurozone, US and Japanese debt markets, through the yields of 10-year sovereign bonds. The sample covers the period from 2002:01 to 2019:07. The analysis aims to provide answers to two questions: Has the global financial crisis accentuated the interdependencies in the Eurozone debt markets? If yes, how did it influence the movements in sovereign bond yields? The results suggest that the global financial crisis did not accentuate the levels of interdependence between the main Euro zone debt markets. In addition, the results suggest the existence of high movements in periods of crisis and not crisis. We also found that yields on PIIGS sovereign bonds decreased their interdependencies with their peers in the years 2002 to 2019, with the exception of the Greek debt market.

show abstract

Financial market integration, stock markets and exchange rate dynamics in Eastern Europe

Cited by 11 publications

References 36 publications

The Comovement of Exchange Rates and Stock Markets in Central and Eastern Europe

The Comovement of Exchange Rates and Stock Markets in Central and Eastern Europe

Economic Consequences of Covid-19 Pandemic: An Analysis of Exchange Rate Behaviour

European Financial Market Integration: A Closer Look at Government Bonds in Eurozone Countries

Contact Info

Product

Resources

About