erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

An Analysis of Exchange Rates and Stock Prices: Evidence for Sweden

Abdulnasser Hatemi-J (Jonkoping University, Sweden)
Manuchehr Irandoust (University of Örebro, Sweden)

Abstract  

This study uses a new Granger non-causality testing procedure developed by Toda and Yamamoto (1995) to contribute to debate on exchange rates and stock prices in Sweden. It examines a possible causal linkage between these variables in a vector autoregression (VAR) model. The results show that Granger causality is unidirectional running from stock prices to effective exchange rates. The results also reveal that an increase in the Swedish stock prices is associated with the appreciation of the Swedish krona. Special attention is given to the estimation methodology and the lag choosing process.

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