Exchange rates and stock markets

University essay from Göteborgs universitet/Institutionen för nationalekonomi med statistik

Author: Adam Fathi; Christian Staf; [2013-07-04]

Keywords: ;

Abstract: The study employs a vector error correction model, cointegration analysis and Granger causality test to examine the short- and long-run dynamic relationship between the USD/SEK exchange rate and the OMXS30. In the short-run we found statistical evidence of OMXS30 granger causing the USD/SEK currency exchange rate positively but no statistical evidence that the USD/SEK exchange rate granger cause OMXS30. In the long-run we found statistically significant evidence of the USD/SEK exchange rate and OMXS30 being cointegrated. The effect of a shock to the USD/SEK currency exchange has a long-run positive effect on the OMXS30. While the effect of a shock to the OMXS30 has a long-run negative effect on the USD/SEK exchange rate.

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