INTERACTIONS BETWEEN EQUITY AND FOREIGN EXCHANGE MARKETS: EVIDENCE FROM THE PRE-AND POST-1997/98 MALAYSIAN DAILY DATA

The primary objective of this paper is to investigate the causal interactions between the Malaysian stock and foreign currency markets using daily data for 1997-98 pre-and post-crisis periods that run from July 4, 1995 through June 30, 1997 and from November 22, 1999 through April 5, 2002 respectively. The ADF test is performed to examine the time series property of each variable. Following the evidence of data stationarity in each variable, Vector Autoregressive (VAR) models are implemented. The coefficients of the relevant explanatory variables are much more magnified for the pre-crisis period than those in the post-crisis period. But in terms of the associated t-values, R²'s and DW-values, the differences between the two periods are not so discernible.