The relationship between stock prices and exchange rate in Pakistan has been examined by using monthly data from July 1981 to June 2004. The cointegration and error-correction model and Granger trivariate causality techniques are used to test the causal relationship between exchange rate and stock prices. The empirical results indicate the uni-directional causal relationship between stock prices and exchange rate. The results indicate that the stock price has negative significant short run causal effect on exchange rate in Pakistan. However, during short run the exchange rate has a bi-directional causal effect on stock prices. No significance relationship is found between stock prices and gold. It suggests that the stock market in Pakistan is inefficient with respect to gold prices. However, money supply and interest rate do affect stock prices, suggesting that monetary policy could be used more effectively to check the movement in stock prices in Pakistan.

(2008). Exchange rate and equity prices relationship: an empirical evidence from Pakistani financial markets [journal article - articolo]. In SAVINGS AND DEVELOPMENT. Retrieved from http://hdl.handle.net/10446/27409

Exchange rate and equity prices relationship: an empirical evidence from Pakistani financial markets

2008-01-01

Abstract

The relationship between stock prices and exchange rate in Pakistan has been examined by using monthly data from July 1981 to June 2004. The cointegration and error-correction model and Granger trivariate causality techniques are used to test the causal relationship between exchange rate and stock prices. The empirical results indicate the uni-directional causal relationship between stock prices and exchange rate. The results indicate that the stock price has negative significant short run causal effect on exchange rate in Pakistan. However, during short run the exchange rate has a bi-directional causal effect on stock prices. No significance relationship is found between stock prices and gold. It suggests that the stock market in Pakistan is inefficient with respect to gold prices. However, money supply and interest rate do affect stock prices, suggesting that monetary policy could be used more effectively to check the movement in stock prices in Pakistan.
articolo
2008
SAVINGS AND DEVELOPMENT
La relation entre les prix des actions et le taux d’échange au Pakistan a été examine dans cet article sur des données qui couvrent la période Juillet 1981 - Juin 2004. Les résultats montrent une relation unidirectionnelle où le prix des action à un effet négatif significatif dans le court terme sur le taux d’échange. Toutefois, le taux d’échange a un effet bidirectionnel sur les prix des actions. Il n’y a pas de relations entre prix des actions et prix de l’or, ce qui entraîne une inefficience du marché. Il y a cependant un effet de l’offre de monnaie et du taux d’intérêt sur les prix actionnaires. La politique monétaire pourrait donc être utilisé pour contrôler les mouvements des prix actionnaires.
Khalid, Mustafa; Nishat, Mohammed
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/27409
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