Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/253803 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Economics, Finance and Administrative Science [ISSN:] 2218-0648 [Volume:] 25 [Issue:] 50 [Publisher:] Emerald Publishing Limited [Place:] Bingley [Year:] 2020 [Pages:] 395-412
Publisher: 
Emerald Publishing Limited, Bingley
Abstract: 
Purpose - This paper aims to investigate simultaneously the causality and the dynamic links between exchange rates and stock market indices. It attempts to identify the short- and long-term effect of the US dollar on major stock market indices of Brazil, Russia, India, China and South-Africa (BRICS) nations. Design/methodology/approach - This paper applies a new methodology combining the panel generalized method of moments model and the panel auto-regressive distributed lag (ARDL) method to investigate the existence of a causal short-/long-run relationships and dynamic dependence among all stock market returns and exchanges rates changes of BRICS countries. Findings - Results show that exchange rate changes have a significant effect on the past and the current volatility of the BRICS stock indices. Besides, ARDL estimations reveal that exchange rate movements have a significant effect on short- and long-term stocks market indices of all BRICS countries Originality/value - The findings have implications for policymakers and market participants who try to manage the exchange rate will have a different dose of intervention if they know that the effects of currency depreciation are different than appreciation. These results have important implications that investors should take into account in frequency-varying exchange rates and stock returns and regulators should consider developing sound policy measures to prevent financial risk.
Subjects: 
ARDL method
BRICS
Co-movement
Dynamic panel/GMM
Exchange rate
Stock markets
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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