Time varying causality between stock market and exchange rate: evidence from Turkey, Japan and England

摘要

In this study, the relationship between exchange rates and stockmarket indices in Turkey, Japan and England was analysed by usingthe time varying causality test. First, by the Kapetanios unit root testthat allows determining structural breaks endogenously and morethan two breaks, stationary levels and break numbers of series wereidentified. Second, based on the belief that the result of especiallylong-term causality can have different consequences in differentperiods due to economic and political crises, a time-varying causalitytest with bootstrap developed by R. Scott Hacker and AbdulnasserHatemi-J was used. As a result of the study using monthly dataspanning the period of January 1990 to April 2013, there existed two-way causality for the three countries in periods when local and global crises were occurring.