Open AccessWHO MOVES WESTERN EUROPE STOCK MARKETS?
Author(s) -
Robertus Setiadi
Publication year - 2021
Publication title -
emerging markets
Language(s) - English
Resource type - Journals
eISSN - 2620-9918
pISSN - 2338-8854
DOI - 10.33555/embm.v8i1.166
Subject(s) - granger causality , stock (firearms) , economics , western europe , financial crisis , stock exchange , currency , closing (real estate) , sample (material) , period (music) , monetary economics , international economics , econometrics , geography , macroeconomics , european union , finance , chemistry , physics , archaeology , chromatography , acoustics
This paper focuses on short- and long-term causal relationship on six major Stock Exchanges in Western Europe which actively traded, while also considering the interaction with US Stock Exchange. The observation period is separated into 3 sub-samples to represent the pre-crisis period, crisis period, and post-crisis period; while the author also distinguishes between local currency and USD denominations in stock closing price. Conversion of local currency in USD denominations shows an effect on increasing the inter-dependence shown in the pre-crisis observation while tested using Johansen test. In the whole-period sample, Belgium, Germany, and the US should be considered as dominant country to granger cause the other Western Europe. Long-term relationships were also tested by granger causality showing different characteristics in each sub-sample. Finally, Italy is the most sensitive country in the response to other Western European countries innovations while tested by Generalized Impulse Response Analysis.