E-Queue Mobile Application Johansen Cointegration-Granger Causality Model Relationship between IDR and BATH Currency
Abstract
The purpose of this study to investigate the relationship in the long term and mutual relationship between the exchange rate of currency IDR (Indonesia) with BATH (Thailand). Study method used in this study, namely the Johansen cointegration and Granger causality. The data used in this study is the currency exchange rate IDR and BATH against the USD on a daily basis from January, 1 2004 to December, 31 2014. The empirical results show that the exchange rate of currency IDR and data BATH are not stationary at the level of intercept level, but the 1 st and 2 scd diff of data exchange stationary. Empirically also indicate that the data exchange rate of currency IDR and BATH cointegrated in the long term, but do not have a reciprocal relationship with using granger test at the rate lags 1-10, 15-20 lags the data using the exchange rate has a one-way relationship.
Downloads
References
Abdalla, I. S. & Murinde, V. (1997). Exchange Rate and Stock Price interactions in emerging financial markets: Evidence on India, Korea, Pakistan and Philippines. Applied Financial Economics, 7, 25-35.
Aggarwal, R. (1981). Exchange rates and stock prices: A study of the US capital markets under floating exchange rates. Akron Business and Economic Review, 12, 7-12.
Ajayi, R. A., Friedman, J. & Mehdian, S. M. (1998). On the relationship between stock returns and exchange rates: Tests of Granger causality. Global Finance, 9, 241-251.
Ajayi, R. A. & Mougou, M. (1996). On the dynamic relation between stock prices and exchange rates. The Journal of Financial Research, 19, 193-207.
Bahmani, O. M. & Sohrabian, A. (1992). Stock Prices and the effective exchange rate of the dollar. Applied Economics, 24, 459-464.
Bhattacharya, B. & Mukherjee, J. (2003). Causal Relationship Between Stock Market and Exchange Rate. Foreign Exchange Reserves and Value of Trade Balance: A Case Study for India, Paper presented at the Fifth Annual Conference on Money and Finance in the Indian Economy, January 2003.
Branson, W. H. (1983). Macroeconomic determinants of real exchange rate, Cambridge University Press, Cambridge, MA.
Chow, E. H., Lee, W. Y. & Solt, M. S. (1997). The exchange rate risk exposure of asset returns. Journal of Business, .70, 105-123.
Dickey, D. A. & Fuller, W. A. (1979). Distribution of the estimates for the autoregressive time series with a unit root.
Journal of the American Statistical Association, 74, 427-431.
Dornbusch, R. & Fisher, S. (1980). Exchange rates and the current account. American Economic Review, 70, 960-971.
Engle, R.F. & Granger, C. W. (1987). Co-integration and Error Correction: Representation, Estimation, and Testing, Econometrica, 55, 251-276.
Franck, P. & Young, A. (1972). Stock Price Reaction of Multinational Firms to Exchange Realignments. Financial Management, 1, 66-73.
Frenkel, J. (1976). A monetary approach to the exchange rate: Doctrinal aspects and empirical evidence. Scandinavian Journal of Economics, 78, 200-224.
Gavin, M. (1989). The stock Market and exchange rate dynamics. Journal of international money and finance, 8, 181-200.
Giovannini, A. & Jorion, P. (1987). Interest rates and risk premia in the stock market and in the foreign exchange market. Journal of International Money and Finance, 6, 107-124.
Granger, C. W. J. (1988). Some recent developments in the concept of causality. Journal of Econometrics, 39, 199-211.
Granger, C. W. J. & Newbold, P. (1974). Spurious regression in econometrics. Journal of Econometrics, 2, 111-120.
Granger, C. W. J., Huang, B. & Yang, C. (2000). A bivariate causality between stock prices and exchange rates: Evidence from recent Asian flu. The Quarterly Review of Economics and Finance, 40, 337-354.
Gujarati D. N. (2003), Basic Econometric., New York: The McGraw-Hill companies Inc.
Johansen, S. (1988). Statistical analysis of cointegrating vectors. Journal of Economic Dynamics and Control, 12, 231-254.
Johansen, S. & Juselius, K. (1990) Maximum likelihood estimation and inference on cointegration, with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52, 169-210.
Jorion, P. (1990). The Exchange Rate Exposure of US Multinationals. Journal of Business, 63, 331-345.
Lyons, S. E. & Murinde, V. (1994). Cointegrated and Granger causality testing of hypothesis on supply leading and demand following finance. Economic Note, 23, 17-36.
MacDonald, R. & Kearney, C. (1987). On the specification of Granger causality tests using the cointegration methodology. Economic Letters, 25, 149-153.
Macdonald, R. & Taylor, M. (1992). Exchange rate economics: A Survey. IMF staff papers, 39, 1-57.
Mansor H. I. (2000), Cointegration and Granger causality tests of stock price and exchange rate interactions in Malaysia”, ASEAN Economic Bulletin, 17, 36-47.
Miller, S. M. & Russek, F. S. (1990). Co-integration and error correction models: the temporal causality between government taxes and spending. Southern Economic Journal, 57, 221-229.
Muhammad, N. & Rasheed, A. (2003). Stock Prices and Exchange Rates: Are they Related? Evidence from South Asian Countries. Paper presented at the 18th Annual 18 General Meeting and Conference of the Pakistan Society of Development Economists, January 2003.
Muradoglu. G., Taskin. F. & Bigan, I. (2001). Causality between stock returns and macroeconomic variables in emerging markets. Russian and East European Finance and Trade, 36, 33-53.
Nieh, C. C. & Lee, C. F. (2001). Dynamic relationship between stock prices and exchange rates for G-7 countries. The Quarterly Review of Economics and Finance, 41, 477–490.
Oxley, L. & Greasley, D. (1998). Vector autoregression, cointegration and causality: testing for causes of the British industrial revolution. Applied Economics, 30, 1387-1397.
Phillips, P. C. B. & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika. 75, 335-346.
Roll, R. (1979). Violations of purchasing power parity and their implications for efficient international commodity markets. In M. Sarnat and G. Szego (eds.), International Finance. and Trade, 1, Cambridge, MA, Ballinger.
Roll, R. (1992). Industrial structure and the comparative behavior of international stock markets indices. Journal of Finance, 47, 3-41.
Soenen, L. A. & Hennigar, E. S. (1988). An analysis of exchange rates and stock prices: The US experience between 1980 and 1986. Akron Business and Economic Review, Winter, 7-16.
Solnik, B. (1987). Using financial prices to test exchange rate models: A note. Journal of Finance, 42, 141-149.
Wu, Y. (2000). Stock prices and exchange rates in a VEC model: The case of Singapore in the 1990s. Journal of Economics and Finance, 24, 260-274.
Yu, Q. (1997). Stock Prices and Exchange Rates: Experience in Leading East Asian Financial Centres Tokyo, Hong Kong and Singapore. Singapore Economic Review, 41, 47-56.
TRANSFER OF COPYRIGHT
JRBEM is pleased to undertake the publication of your contribution to Journal of Research in Business Economics and Management.
The copyright to this article is transferred to JRBEM(including without limitation, the right to publish the work in whole or in part in any and all forms of media, now or hereafter known) effective if and when the article is accepted for publication thus granting JRBEM all rights for the work so that both parties may be protected from the consequences of unauthorized use.
