Testing for Cointegration with Threshold Effect between Stock Prices and Exchange Rates in Japan and Taiwan

doi:10.1016/j.japwor.2008.09.001

淡江大學機構典藏 > 商管學院 > 財務金融學系暨研究所 > 期刊論文 > Item 987654321/50320

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Title:	Testing for Cointegration with Threshold Effect between Stock Prices and Exchange Rates in Japan and Taiwan
Authors:	Yau, Hwey-yun;聶建中;Nieh, Chien-Chung
Contributors:	淡江大學財務金融學系
Keywords:	Exchange rates;Stock prices;Threshold cointegration;Threshold error-correction model (TECM)
Date:	2009-08-01
Issue Date:	2010-08-09 15:33:18 (UTC+8)
Publisher:	Elsevier
Abstract:	This paper empirically investigates the exchange rate effects of the New Taiwan dollar against the Japanese Yen (NTD/JPY) on stock prices in Japan and Taiwan from January 1991 to Mach 2008. Our study employs the newly threshold error-correction model (TECM) elaborated by Enders and Granger [Enders, W., Granger, C.W.F., 1998. Unit-root tests and asymmetric adjustment with an example using the term structure of interest rates. Journal of Business Economics & Statistics 16, 304–311] and Enders and Siklos [Enders, W., Siklos, P.L., 2001. Cointegration and threshold adjustment. Journal of Business Economics & Statistics 19, 166–176], assuming the nature of the relationship between the variables is on the basis of non-linearity. The empirical evidence suggests that there is a long-run equilibrium relationship between NTD/JPY and the stock prices of Japan and Taiwan during the time period investigated. However, an asymmetric threshold cointegration relationship only exists in Taiwan’s financial market. Furthermore, we extend our research by taking into account the effect of the U.S. exchange rate specifically on Taiwan’s financial market. This research also finds a long-term equilibrium and asymmetric causal relationships between NTD/USD and the stock prices of Taiwan. In addition, the results of TECM Granger-Causality tests show that no short-run causal relationship exists between the two financial assets considered for both countries’ cases. However, in the long run a positive causal relationship running from either the Japan or U.S. exchange rate to the stock prices of Taiwan strongly argues for the traditional approach.
Relation:	Japan and the World Economy 21(3), pp.292-300
DOI:	10.1016/j.japwor.2008.09.001
Appears in Collections:	[財務金融學系暨研究所] 期刊論文

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