Exchange Market Pressure, Stock Prices, and Commodity Prices East of the Euro
Aim/purpose - This paper aims to examine connections between the exchange, equity, commodity and commodity markets of a set of Central and Eastern European (CEE) economies using monthly time-series data. In particular, we examine whether stock - or commodity - price changes might put pressure on the...
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| Format: | Article |
| Language: | English |
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Sciendo
2018-03-01
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| Series: | Journal of Economics and Management |
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| Online Access: | https://www.ue.katowice.pl/fileadmin/user_upload/wydawnictwo/JEM_Artyku%C5%82y_31_60/JEM_31/04.pdf |
| _version_ | 1819046727150206976 |
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| author | Scott W. Hegerty |
| author_facet | Scott W. Hegerty |
| author_sort | Scott W. Hegerty |
| collection | DOAJ |
| description | Aim/purpose - This paper aims to examine connections between the exchange, equity, commodity and commodity markets of a set of Central and Eastern European (CEE) economies using monthly time-series data. In particular, we examine whether stock - or commodity - price changes might put pressure on these currencies to depreciate, and whether these pressures are transmitted within the region or from larger neighbors. Design/methodology/approach - This paper creates monthly indices of Ex-change Market Pressure (EMP) from 1998 to 2017 using a combination of currency depreciation, reserve losses, and changes in interest-rate differentials for the Czech Republic, Hungary, Poland, and Ukraine, Bulgaria, and Romania. After examining these indices for evidence of currency 'crises', and their components for evidence of changes in currency policy, Vector Autoregressive (VAR) methods such as Granger causality and impulse-response functions are used to examine connections between EMP, domestic and foreign stock returns, and changes in commodity prices in the first four countries listed. Findings - While EMP increased in 2008, and the degree of central banks' currency- -market interventions decreased afterward, this paper uncovers key differences among countries. In particular, the Czech Republic is relatively insulated from international transmissions, while Hungary is more susceptible to global spillovers and Poland is exposed to events originating elsewhere in the CEE region. Ukraine shows bidirectional causality between its EMP and stock indices, and finds that pressure on the hryvnia increases if commodity or oil prices decline. Research implications/limitations - This study adds to the relatively limited literature regarding this region, and highlights particular vulnerabilities for both individual countries and specific neighbors; further research is necessary to uncover the channels of transmission using economic modeling. Originality/value/contribution - This study explicitly models two major economic processes in a part of the world that is relatively rarely examined. These include events in Central and Eastern European exchange markets and central bank intervention, and also interlinkages among regional currency and equity markets, foreign equity markets, and global commodity prices. This will allow policymakers to assess integration between these countries, the rest of the European Union, and the global economy.(original abstract) |
| first_indexed | 2024-12-21T10:49:04Z |
| format | Article |
| id | doaj.art-2f2d849f8701418aac076faab09c6bc3 |
| institution | Directory Open Access Journal |
| issn | 1732-1948 |
| language | English |
| last_indexed | 2024-12-21T10:49:04Z |
| publishDate | 2018-03-01 |
| publisher | Sciendo |
| record_format | Article |
| series | Journal of Economics and Management |
| spelling | doaj.art-2f2d849f8701418aac076faab09c6bc32022-12-21T19:06:42ZengSciendoJournal of Economics and Management1732-19482018-03-0131749410.22367/jem.2018.31.04Exchange Market Pressure, Stock Prices, and Commodity Prices East of the EuroScott W. Hegerty0Department of Economics Faculty of Arts and Sciences Northeastern Illinois University, Chicago, USAAim/purpose - This paper aims to examine connections between the exchange, equity, commodity and commodity markets of a set of Central and Eastern European (CEE) economies using monthly time-series data. In particular, we examine whether stock - or commodity - price changes might put pressure on these currencies to depreciate, and whether these pressures are transmitted within the region or from larger neighbors. Design/methodology/approach - This paper creates monthly indices of Ex-change Market Pressure (EMP) from 1998 to 2017 using a combination of currency depreciation, reserve losses, and changes in interest-rate differentials for the Czech Republic, Hungary, Poland, and Ukraine, Bulgaria, and Romania. After examining these indices for evidence of currency 'crises', and their components for evidence of changes in currency policy, Vector Autoregressive (VAR) methods such as Granger causality and impulse-response functions are used to examine connections between EMP, domestic and foreign stock returns, and changes in commodity prices in the first four countries listed. Findings - While EMP increased in 2008, and the degree of central banks' currency- -market interventions decreased afterward, this paper uncovers key differences among countries. In particular, the Czech Republic is relatively insulated from international transmissions, while Hungary is more susceptible to global spillovers and Poland is exposed to events originating elsewhere in the CEE region. Ukraine shows bidirectional causality between its EMP and stock indices, and finds that pressure on the hryvnia increases if commodity or oil prices decline. Research implications/limitations - This study adds to the relatively limited literature regarding this region, and highlights particular vulnerabilities for both individual countries and specific neighbors; further research is necessary to uncover the channels of transmission using economic modeling. Originality/value/contribution - This study explicitly models two major economic processes in a part of the world that is relatively rarely examined. These include events in Central and Eastern European exchange markets and central bank intervention, and also interlinkages among regional currency and equity markets, foreign equity markets, and global commodity prices. This will allow policymakers to assess integration between these countries, the rest of the European Union, and the global economy.(original abstract)https://www.ue.katowice.pl/fileadmin/user_upload/wydawnictwo/JEM_Artyku%C5%82y_31_60/JEM_31/04.pdfStock marketsRate of returnCommodity priceTime-series |
| spellingShingle | Scott W. Hegerty Exchange Market Pressure, Stock Prices, and Commodity Prices East of the Euro Journal of Economics and Management Stock markets Rate of return Commodity price Time-series |
| title | Exchange Market Pressure, Stock Prices, and Commodity Prices East of the Euro |
| title_full | Exchange Market Pressure, Stock Prices, and Commodity Prices East of the Euro |
| title_fullStr | Exchange Market Pressure, Stock Prices, and Commodity Prices East of the Euro |
| title_full_unstemmed | Exchange Market Pressure, Stock Prices, and Commodity Prices East of the Euro |
| title_short | Exchange Market Pressure, Stock Prices, and Commodity Prices East of the Euro |
| title_sort | exchange market pressure stock prices and commodity prices east of the euro |
| topic | Stock markets Rate of return Commodity price Time-series |
| url | https://www.ue.katowice.pl/fileadmin/user_upload/wydawnictwo/JEM_Artyku%C5%82y_31_60/JEM_31/04.pdf |
| work_keys_str_mv | AT scottwhegerty exchangemarketpressurestockpricesandcommoditypriceseastoftheeuro |