Exchange rates,stock prices,and money markets: evidence from Singapore |
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Institution: | 1. Lahore University of Management Sciences, Pakistan;2. Iqra University, Islamabad Campus, Pakistan;3. Taylor''s University, Malaysia;1. Department of Materials Science and Engineering, University of North Texas, Denton, TX 76203, United States of America |
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Abstract: | This paper uses a monetary approach to analyze the asymmetric asset-price movements (exchange rates and stock prices) in Singapore, a small open economy with managed exchange rate targeting. The Singapore dollar exchange rates vis-à-vis the developed countries’ currencies are negatively related to stock prices whereas the relationship between the Singapore dollar-Malaysian ringgit exchange rate and stock prices is positive instead. The pattern of asymmetry is explained by the relative exchange-rate elasticity of real money demand and real money supply and evidenced by the distributed-lag regression and VAR analysis. Furthermore, the distributed-lag regression of monthly data suggests that fiscal revenues as well as fiscal expenditures exert positive influences on stock prices. |
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