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Exchange Rates and Stock Prices in the MENA Countries: What Role for Oil?
Author(s) -
Chortareas Georgios,
Cipollini Andrea,
Eissa Mohamed Abdelaziz
Publication year - 2011
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2011.00641.x
Subject(s) - economics , cointegration , oil price , monetary economics , emerging markets , stock (firearms) , stock market , exchange rate , linkage (software) , stock exchange , crude oil , shock (circulatory) , middle east , financial economics , econometrics , international economics , macroeconomics , finance , chemistry , mechanical engineering , medicine , paleontology , biochemistry , horse , biology , gene , law , petroleum engineering , political science , engineering
This paper considers the linkage between stock prices and exchange rates in four MENA (Middle East and North Africa) emerging markets. In contrast to the existing evidence that uses a global market index to uncover such a relationship it is found that for the sample countries oil prices emerge as the dominant factor in the above relationship. The paper considers the presence of regime shifts and evidence is found of cointegration only for the period following the 1999 oil price shock. Readjustment towards equilibrium in each stock market occurs via oil price changes. Finally, a number of robustness checks are performed and persistence profiles produced.