Stock Prices, Foreign Exchange Reserves, and Interest Rates in Emerging and Developing Economies in Asia
This paper examines the relationship between a) stock prices and b) foreign reserves, exchange rates, and interest rates in emerging and developing economies in Asia. Empirical results show that there is no co integration relationship among these four variables. Instead, foreign reserves have significant positive effects on stock prices; however, the opposite is not true. Moreover, exchange rates and interest rates have not influenced stock prices. Accumulation of foreign reserves is important in these countries, as it engenders financial stability and economic growth.
Full Text: PDF