Stock Prices and Exchange Rates in Indonesia: Further Evidence
Abstract
The paper examines the relationship between stock prices and exchange rates for the case of Indonesia. The study uses daily and weekly data for the period January 1998 to December 2007. We employed Toda and Yamamoto (1995) Granger non-causality test in both bivariate and multivariate setting to examine the relationship between stock prices and exchange rates. The results of this study suggest a strong evidence of bi-directional causality between these two financial variables. The results have implications for investors, practitioners and policy makers.
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