Impact of the Global Crisis on the Financial Linkages between the Stock Market and the Foreign Exchange Market from Romania

Abstract

This paper explores the financial linkages between the Romanian stock marketand the exchange market in the context of the global crisis. We investigate suchrelations for two periods of time: one from January 2006 to February 2008,when the Romanian financial markets were quite tranquil and the other fromMarch 2008 to September 2009, while the global crisis effects wereconsiderable for Romania. For the first period of time we could not provesignificant relations between the foreign exchange market and the stock market.Instead, for the second period of time we found a unidirectional causality fromthe exchange rates to the stock prices.

Keywords

• Romanian financial markets
• Vector Autoregression
• GARCH
• Granger causality
• financial linkages