How foreign capital flows affect equity and foreign exchange markets? -The case of Asia emerging markets

• Main Authors: Jian-long Lin, 林建龍
• Other Authors: Tza-shr Wang
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/08822369006637507752

碩士 === 國立成功大學 === 財務金融研究所 === 97 === The purpose of this article is to explore the relationship between capital flows, foreign exchange markets, and foreign equity returns. We utilize Vector Autoregression models (VAR) and simultaneous estimation models to test these interrelationships. From the results of simultaneous equations estimation, we find that foreign equity returns and exchange rate returns are significant correlated for most of countries under investigation. Among the significant countries, foreign equity returns are positively associated with exchange rate returns for Philippine, Singapore and Taiwan, but negatively correlated for Indonesia and Malaysia. For all emerging countries, we find US stock index return has significantly positive effects on foreign stock index returns. Moreover, the VAR analysis shows that most responses of the dependent variables (exchange rate return, foreign stock return, and equity flow) to the unexpected shocks of other variables are most prominent for one month and persist for two to three months.