Studying the relationship between exchange rate systems and stock indices for Tunisia and Jordan - Using the simultaneous integration method, error model correction and causal tests for the period 2001-2013

Abstract

This study aims determining the relationship between exchange rate systems and stock indices for the financial markets of Tunisia and Jordan during the period 2001-2013 based on the method of co-integration and error correction model and causal’s tests after studying series stability using tests ADF(1981)-PP(1988). The study concluded that there is a synchronous integration relationship and there is no causal relationship between fixed exchange rates and equity indices represented in the financial market of Jordan and The absence of synchronous integration relationship with a two-way causal relationship between flexible exchange rates and equity indices represented in the Tunisian financial market