Testing for cointegration with threshold effect between stock prices and exchange rates in Japan and Taiwan

Impact of Foreign Exchange rate on stock prices

“…Moving on, Branson (1983) discusses his stock oriented model of exchange rates and emphasizes on the fact that the exchange rates serve to equate the supply and demand for assets including the stocks and the bonds. Yau and Nieh (2008) note that even though the existence of a relationship is often signified by the researchers between the stock exchange returns and the exchange rates, the length and the direction of the relationship is often an element of further debate. Interestingly, using the granger causality and the relationship between the financial assets and exchange rates of USA and Japan, Yau and Nieh (2008) find that there is no short term causal relationship between the two however in the long run a positive relationship has been found to exist.…”

“…Yau and Nieh (2008) note that even though the existence of a relationship is often signified by the researchers between the stock exchange returns and the exchange rates, the length and the direction of the relationship is often an element of further debate. Interestingly, using the granger causality and the relationship between the financial assets and exchange rates of USA and Japan, Yau and Nieh (2008) find that there is no short term causal relationship between the two however in the long run a positive relationship has been found to exist. Kim (2003) uses the error correction technique and the co integrating system to investigate whether a long term relationship exists between the exchange rates and the stock prices in the United States.…”

Is the liberalization policy effective on improving bivariate cointegration of current accounts, foreign exchange, stock prices? Further evidence from Asian markets

“…Each has a long-run cointegration relationship between exchange rate and stock price for seven countries except two cointegrations which each has for Korea, the Philippines, and Thailand. Specifically, conforming to [20], showing that Taiwan has one cointegration between stock price and exchange rate (NTD/USD). For the case of current account and exchange rate, Korea, Malaysia, Indonesia, the Philippines have two conitegration relationships.…”

“…Numerous works have provided evidences which have been quite mixed for the sign and causal direction 2 . Several empirical studies present evidence on Asian countries in favor of a causal relation between exchange rate and stock price ( [17]; [18]; [19]; [1]; [2]; [3]; [4]; [20]; [21]) 3 .…”

Interrelationship and Spillover Effect between Stock and Exchange Rate Markets in the Major Emerging Economies

“…In addition, it is common knowledge that the two major national financial markets are integrated and intertwined to some extent, so it undoubtedly raises a question -what is the level of shock spillover between stock and exchange rate markets, and which market has higher shock transmission influence on the other one? Following papers, inter alia, dealt with this issue - Caporale et al (2014), Yau and Nieh (2009) and Inci and Lee (2014).…”