Insaidoo, Michael; B a u-Insaidoo, William Gab iel; Pep ah, James A a; Can ah,
William God ed
A icle
The ole o inancial globaliza ion in he long- un ola ili y
be ween o ex and s ock ma ke s du ing COVID-19:
E idence om A ica
Resea ch in Globaliza ion
P o ided in Coope a ion wi h:
Else ie
Sugges ed Ci a ion: Insaidoo, Michael; B a u-Insaidoo, William Gab iel; Pep ah, James A a; Can ah,
William God ed (2024) : The ole o inancial globaliza ion in he long- un ola ili y be ween
o ex and s ock ma ke s du ing COVID-19: E idence om A ica, Resea ch in Globaliza ion, ISSN
2590-051X, Else ie , Ams e dam, Vol. 9, pp. 1-10,
h ps://doi.o g/10.1016/j. esglo.2024.100242
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/331170
S anda d-Nu zungsbedingungen:
Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen
Zwecken und zum P i a geb auch gespeiche und kopie we den.
Sie dü en die Dokumen e nich ü ö en liche ode komme zielle
Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich
machen, e eiben ode ande wei ig nu zen.
So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen
(insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en,
gel en abweichend on diesen Nu zungsbedingungen die in de do
genann en Lizenz gewäh en Nu zungs ech e.
Te ms o use:
Documen s in EconS o may be sa ed and copied o you pe sonal
and schola ly pu poses.
You a e no o copy documen s o public o comme cial pu poses, o
exhibi he documen s publicly, o make hem publicly a ailable on he
in e ne , o o dis ibu e o o he wise use he documen s in public.
I he documen s ha e been made a ailable unde an Open Con en
Licence (especially C ea i e Commons Licences), you may exe cise
u he usage igh s as speci ied in he indica ed licence.
h ps://c ea i ecommons.o g/licenses/by-nc/4.0/
The ole o inancial globaliza ion in he long- un ola ili y be ween o ex
and s ock ma ke s du ing COVID-19: E idence om A ica
Michael Insaidoo
a
,
*
, William Gab iel B a u-Insaidoo
b
, James A a Pep ah
c
, William
God ed Can ah
b
a
Depa men o Economics and Ac ua ial Science, Facul y o Accoun ing and Finance, Uni e si y o P o essional S udies, Acc a, Ghana
b
Depa men o Da a Science and Economic Policy, School o Economics, Uni e si y o Cape Coas , Ghana
c
Depa men o Applied Economics, School o Economics, Uni e si y o Cape Coas , Ghana
ARTICLE INFO
Keywo ds:
S ock ma ke ola ili y
Exchange a e ola ili y
Financial globaliza ion
COVID-19
Long- un ola ili y
ABSTRACT
This s udy examines he long- un ola ili y be ween o ex and s ock ma ke s and he ole o inancial global-
iza ion in his ela ionship in A ica, du ing he COVID-19 pandemic pe iod, using panel Fully Modi ied O dina y
Leas Squa es (FMOLS) and panel Dynamic O dina y Leas Squa es (DOLS) app oaches. Ou empi ical ou comes
e ealed bi-di ec ional long- un ola ili y be ween he wo inancial ma ke s in he COVID-19 pandemic pe iod.
The esul s u he es ablished ha , inancial globaliza ion educes o ex ma ke s’ ola ili y e ec s on s ock
ma ke s’ ola ili y, whils i heigh ens s ock ma ke s’ ola ili y e ec s on o ex ma ke s’ ola ili y in A ica,
du ing he COVID-19 pandemic pe iod. The implica ions o his s udy, include he need o ha ness he s abilising
po en ial o inancial globaliza ion in he long- un ola ili y be ween o ex and s ock ma ke s, p ima ily h ough
asse di e si ica ion, enhanced in o ma ion low, and ma ke e iciency in A ican inancial ma ke s.
In oduc ion
Inc eased in e na ional equi y lows heigh en he demand and sup-
ply o cu encies in which hese equi ies a e denomina ed, esul ing in
some le el o in e dependence be ween he o ex and s ock ma ke s.
This in eg a ion o inancial ma ke s exposes hese ma ke s o luc ua-
ions in global and na ional economies (Lakshmanasamy, 2021). Simi-
la ly, exchange a es a e ulne able o luc ua ions in global inancial
ma ke which ends o a ec economies a ound he globe. In ma ke
economies, he mechanisms o ee- loa ing and managed loa ing ex-
change a es, o some deg ee, douses he exchange a e ola ili y (Ka -
oui, 2006). Domes ic s ock p ices and i s e u ns a e ulne able o
luc ua ions in global ma ke s and exchange a e ola ili y, which causes
ola ili y in domes ic s ock ma ke . Ex ended s ock ma ke ola ili y
dis up s he p ice mechanism o he capi al ma ke s, which can esul in
holde s o o eign equi ies o ace g ea e isks o exchange a e
ola ili y.
Globaliza ion o e he pas i e decades ha e led o inc eased in-
e es in in e na ional equi y in es men s (Uni ed S a es’Na ional
Resea ch Council [NRC], 1995). The upsu ge in in es men s in in e -
na ional equi y has occasioned a hike in ac i i ies in o eign cu encies’
ma ke . As a esul o he inc eased in e dependency, ola ili y be ween
s ock and o ex ma ke s is heigh ened esul ing in iskie in es men s in
in e na ional po olio, which u he leads o poo pe o mance o hese
in es men s (Kanas, 2000). S ock and o ex ma ke s, which a e subse s
o inancial ma ke s a e ulne able o di e en c isis, which occasions
hei inc eased ola ili y (Zhao e al., 2023). Wi h COVID-19 pandemic
being seen as one o he ha des hi global c isis (Ba ai &Dha , 2021;
Nasee e al., 2023), does he ecen pandemic heigh ens he co-
mo emen o o ex and s ock ma ke s in A ica. Mo eo e , Alagidede
(2008) shows, ha A ican ma ke s a e no well in eg a ed wi h each
o he , and e ealed weak linkage be ween hese ma ke s and he es o
he wo ld, indica ing ha A ica’s ma ke espond o local a he han
global in o ma ion.
Financial globaliza ion acco ding o A es is and Basu (2004) is he
phenomenon in which inancial ma ke s o di e en coun ies become
in e connec ed in o a uni ied sys em o an un es ic ed low o inancial
esou ces ac oss in e na ional bo de s. Financial globaliza ion is con-
nec ed o he s ock ma ke in a numbe o ways. Financial globaliza ion
allows in es o s in one coun y o in es in s ocks o companies in
ano he , leading o inc eased capi al lows, which has he po en ial o
impac s ock p ices. I also p o ides in es o s wi h g ea e oppo uni ies
* Co esponding au ho .
E-mail add ess: [email p o ec ed] (M. Insaidoo).
Con en s lis s a ailable a ScienceDi ec
Resea ch in Globaliza ion
jou nal homepage: www.sciencedi ec .com/jou nal/ esea ch-in-globaliza ion
h ps://doi.o g/10.1016/j. esglo.2024.100242
Recei ed 6 Janua y 2024; Recei ed in e ised o m 29 July 2024; Accep ed 2 Augus 2024
Resea ch in Globaliza ion 9 (2024) 100242
A ailable online 6 Augus 2024
2590-051X/© 2024 The Au ho (s). Published by Else ie L d. This is an open access a icle unde he CC BY license ( h p://c ea i ecommons.o g/licenses/by/4.0/ ).
o di e si y hei po olios (s ocks) in e na ionally, educing isk and
po en ially inc easing e u ns. In addi ion, local companies can aise
capi al ( h ough sale o s ocks) by a ac ing o eign in es men h ough
Fo eign Di ec In es men (FDI). Fu he , since inancial globaliza ion
elies on he o ex ma ke , changes in cu ency alues can a ec he
compe i i eness o mul ina ional companies, in luencing hei s ock
p ices.
Wi h espec o inancial globaliza ion connec ion o o ex ma ke s,
hese a e he key linkages. As businesses and in es o s engage in c oss-
bo de ansac ions, he demand o di e en cu encies inc eases,
d i ing ac i i y in he o ex ma ke . Mo eo e , due o he exposu e o
in es o s o a ious cu encies as hey engage in in e na ional in es -
men , exchange a e luc ua ions di ec ly impac he e u ns on hese
in es men s. Addi ionally, since global ade depends on o ex ma ke ,
exchange a e luc ua ions can a ec he compe i i eness o expo s and
impo s, in luencing ade balances. Fu he mo e, as mul ina ional
companies make in es men s globally, hey pa icipa e in o ex ma ke
o manage cu ency isk and op imize e u ns on hei in es men s.
Financial globaliza ion, acco ding o Co della and Ospino Rojas (2017),
play ei he a s abilizing o des abilizing ole in inancial ma ke ola-
ili y. The o me ole p o ides an a enue o mo e e icien isk sha ing,
whils he la e ole p o ides a ehicle o con agion. Pu suan o his
discussion, does inancial globaliza ion s abilizes o des abilizes he
long- un ola ili y be ween s ock and o ex ma ke s in A ica, du ing he
COVID-19 pandemic pe iod.
This s udy, in addi ion o examining he long- un ola ili y be ween
s ock and o ex ma ke s in eigh A ican coun ies, du ing he COVID-19
pandemic pe iod, assesses he mode a ing ole o inancial globaliza ion
in his ela ionship. Whils empi ical li e a u e is inunda ed wi h s udies
on he co-mo emen o s ock and o ex ma ke s, empi ical s udies on he
mode a ing ole o inancial globaliza ion in his ela ionship is o he
bes o ou knowledge absen . Thus, his s udy p oposes o examine he
mode a ing ole o inancial globaliza ion in he long- un ola ili y be-
ween s ock and o ex ma ke s, using eigh A ican coun ies da a,
du ing he COVID-19 pandemic pe iod. The aim is o examine whe he
hese economies in eg a ion in he global inancial a chi ec u e in-
c eases o educes he co-mo emen o he wo inancial ma ke s in he
A ican se ing.
The es o he s udy e ol es as ollows. The second sec ion p esen s
he li e a u e e iew, whils he hi d sec ion p o ides he da a and
me hodology used o he pape . Discussions on he esul s a e p esen ed
in he ou h sec ion, wi h he i h sec ion cap u ing he conclusion and
policy implica ions o he esul s o he s udy.
Li e a u e e iew
Theo e ical e iew
This s udy is p emised on he low-o ien ed model p opounded by
Do nbusch and Fische (1980), and he s ock-o ien ed model a ibu ed
o B anson and Hende son (1985), and F ankel (1992). The low-
o ien ed model asse s a posi i e co-mo emen o exchange a es and
s ock p ices. The idea unde lying his model is ha , exchange a e de-
e mines he ade balance o cu en accoun balance o a coun y. The
model explains ha , dep ecia ion in local cu ency makes local i ms
compe i i e wi h hei cheape p oduc s in he in e na ional ma ke s,
ansla ing in o cheape expo s. These compe i i e expo s d i e up
demand, leading o an inc eased expo s olume, which ansla e in o an
app ecia ion o weal h o local i ms, wi h he po en ial o an upsu ge in
he alue o domes ic s ock p ices o hese local i ms. In his ega d, he
s ock ma ke is he ecipien o ola ili y, whils he o eign exchange
ma ke becomes he o igina o . On he con a y, he s ock-o ien ed
model, ca ego ized in o po olio balance model and mone a y model,
posi ha ma ke ac i i ies in inancial asse s (equi y and bonds) de-
e mines he exchange a e. The po olio balance model asse s ha ,
when domes ic s ock p ices ise, in es o s who a e holde s o o eign and
domes ic asse s, including o eign and domes ic cu encies would be
incen i ized o inc ease hei in es men s in domes ic asse s. To his
end, o eign asse s a e sac i iced o aise mo e domes ic cu ency o
local in es men pu poses, esul ing in app ecia ion o he local cu -
ency. The mone a y model on he o he hand, pos ula es a weak o no
co-mo emen o s ock p ices and exchange a e.
Empi ical e iew
Vola ili y be ween o ex and s ock ma ke s in COVID-19 pandemic pe iod
The li e a u e on examina ion o he ola ili y be ween he s ock and
o ex ma ke s in he COVID-19 pandemic pe iod is limi ed. Van De
Wes huizen e al. (2022) using da ase spanning Janua y 1979 o Augus
2021, in es iga es he in e -dependence and ola ili y spillo e s be-
ween s ock and o ex ma ke s o Sou h A ica, inco po a ing he e ec
o COVID-19 pandemic in hese ela ionships, using he EGARCH
me hodology. The s udy shows bidi ec ional ansmission o ola ili y
be ween o ex and s ock ma ke s, con i ming he p esence o con agion
be ween hese ma ke s. The s udy u he con i med ha , ola ili y
spillo e s we e mo e p onounced du ing he COVID-19 pandemic
pe iod, con i ming he hike in con agion du ing pe iods o u bulence. In
a simila s udy, Rai and Ga g (2022) among o he objec i es, used he
BEKK-GARCH app oach, o examine he ola ili y spillo e be ween
s ock p ices and exchange a es in BRIICS economies. The indings show
a gene al ansmission o ola ili y be ween he o ex and s ock ma ke s
in mos o hese economies. Speci ically, he s udy ound ha , du ing he
COVID-19 pe iod, domes ic s ock e u ns plumme ed which led o
capi al ou lows esul ing in an inc ease in exchange a es.
Financial globaliza ion and inancial ma ke ola ili y
Simila ly, he s udies on he assessmen o he impac o inancial
globaliza ion on inancial ma ke ola ili y is limi ed. Fo ins ance,
using he gene alized me hod o momen s (GMM) app oach, Gaies e al.
(2020) explo ed he e ec s o inancial globaliza ion on g ow h in
de eloping coun ies, pa icula ly conside ing exchange a e. Amongs
o he indings, he s udy e ealed a nega i e impac o inancial glob-
aliza ion on exchange a e ola ili y. In a simila s udy, Esqueda e al.
(2012) using a dynamic panel da a amewo k and da a o e he
1995–2007 pe iod, examined he impac o inancial globaliza ion on
s ock ma ke ola ili y. The s udy e ealed ha , inancial globaliza ion
educes s ock ma ke ola ili y in 22 eme ging ma ke s, whils i did no
ha e any impac on s ock ma ke ola ili y in 22 indus ial economies.
Simila ly, Co della and Ospino Rojas (2017) using 84 coun ies, assessed
he impac o inancial globaliza ion on s ock ma ke ola ili y o he
1992 –2016 pe iod. The esul s es ablished a educ ion o s ock ma ke
ola ili y by inancial globaliza ion in s eady pe iods, whils i inc eased
he ola ili y in u bulen pe iods. The s udy also indica ed ha ,
compa a i ely, he ola ili y educ ion p ope ies o inancial global-
iza ion domina e, and is mo e p onounced in on ie ma ke s.
As e idenced in he e iew o p e ious s udies, none o hem has
conduc ed a panel s udy o examine he mode a ing ole o inancial
globaliza ion in he long- un ola ili y be ween o ex and s ock ma ke s
in A ica, du ing COVID-19 pe iod. This he e o e p o ides g ounds o
he p esen s udy.
Hypo hesis
To asce ain he mode a ing ole o inancial globaliza ion in he
long- un ola ili y be ween o ex and s ock ma ke s in A ica, du ing
COVID-19 pe iod, he ollowing hypo heses a e s a ed:
Ho: Financial globaliza ion does no mode a e he long- un ola ili y
be ween o ex and s ock ma ke s du ing COVID-19.
Ha: Financial globaliza ion mode a es he long- un ola ili y be-
ween o ex and s ock ma ke s du ing COVID-19.
M. Insaidoo e al. Resea ch in Globaliza ion 9 (2024) 100242
2
Da a, model and he empi ical me hodology
Da a
To assess he long- un ola ili y be ween o ex and s ock ma ke s,
du ing COVID-19 pandemic pe iod, he s udy has compiled da ase on
daily p ices and e u ns o s ock indices and exchange a es o eigh
A ican coun ies, namely, Bo swana, Egyp , Ghana, Kenya, Mau i ius,
Mo occo, Sou h A ica, and Tunisia. Ele en s ock ma ke s we e used o
his s udy, wi h Sou h A ica and Kenya p o iding h ee and wo s ock
ma ke s espec i ely. These A ican coun ies/s ock ma ke s we e
selec ed based on he a ailabili y o da a. In he o ex ma ke , na ional
local cu encies a e quo ed agains he US dolla , which se es as he
base cu ency. The s ock p ices used o his s udy a e quo ed in local
cu encies. The s ock indices and exchange a es da a a e sou ced om
in es ing.com, whils he inancial globaliza ion index is sou ced om
KOF Swiss Economic Ins i u e. The s ock index o Ghana was sou ced
om he Ghana S ock Exchange.
The sample pe iod o he COVID-19 pe iod spans om Ma ch 11,
2020, o Decembe 30, 2020. The da ase o his s udy s a s om
Ma ch 11, 2020 because his is he da e he WHO decla ed COVID-19 as
a global pandemic. Whils he heal h c isis, he magni ude o he COVID-
19, has endency o ad e sely impac inancial ma ke s, in he same
ein, he disco e y and dis ibu ion o COVID-19 accines cons i u e a
posi i e news, which can ansla e in a posi i e in luence on inancial
ma ke s. To decouple he possible posi i e in luence o he COVID-19
accine in he co-mo emen o o ex and s ock ma ke s in A ica, he
da ase o his s udy ends a Decembe 30, 2020. This end da e is
because on Decembe 31, 2020, WHO issued i s i s eme gency use
alida ion o a COVID-19 accine, which was aimed a ensu ing equi-
able global access o COVID-19 accines (see Wo ld Heal h O ganiza-
ion, 2020). The sou ces o da a, as well as he desc ip ion o a iables
used o he s udy a e epo ed in Table 1.
Jus i ica ion o a iables
Fo his s udy, he a iables o in e es a e s ock ma ke ola ili y,
exchange a e ola ili y, and inancial globaliza ion, whils he con ol
a iables a e ola ili y index, s ock e u ns, and exchange a e e u ns.
To examine he long- un ola ili y be ween s ock and o ex ma ke s, he
wo dependen a iables used o his s udy a e s ock ma ke ola ili y
and exchange a e ola ili y. This is in pu suan o he s udies o Hung
(2022), Jeb an (2018), and Leung e al. (2017). These ola ili ies we e
measu ed using he EGARCH me hodology. To achie e he objec i es o
his s udy, he independen a iable o in e es is exchange a e ola-
ili y in a model whe e s ock ma ke ola ili y is he dependen a iable,
and when exchange a e ola ili y is he dependen a iable, s ock
ma ke ola ili y becomes he independen a iable o in e es . Ex-
change a e e u ns ha e been ound o ha e an in luence on exchange
a e ola ili y. The local cu ency dep ecia ion causes a all in he a e o
e u ns, which esul s in an inc ease in exchange a e ola ili y
(Mohammed e al., 2021). This sugges s an in e se ela ionship be ween
exchange a e e u ns and i s ola ili y. A company’s p o i abili y in-
duces demand o i s s ocks, wi h highe p o i le els causing an upsu ge
in he in e es in he company’s s ocks (He muningsih, 2013). Conse-
quen ly, a company’s s ocks wi h imp o ed e u ns (p o i abili y) would
likely a ac high demand o he company’s s ocks. Based on ma ke
mechanism, he su ge in demand would likely cause a hike in s ock
p ice, leading o i s inc eased ola ili y. This implies a posi i e associ-
a ion o s ock e u ns o i s ola ili y. This s udy a emp s o in es iga e
he mode a ing ole o inancial globaliza ion in he ela ionship be-
ween s ock ma ke ola ili y and exchange a e ola ili y. To his end,
inancial globaliza ion has been shown o ha e an in luence on hese
ola ili ies (see Esqueda e al., 2012; Gaies e al., 2020). The KOF Swiss
Economic Ins i u e p o ides he inancial globaliza ion, de ac o index
used in his s udy, which uses i e indica o s in i s measu emen . These
indica o s a e o eign di ec in es men (measu ed as sum o s ocks o
asse s and liabili ies o o eign di ec in es men as a pe cen age o G oss
Domes ic P oduc (GDP)), po olio in es men (measu ed as sum o
s ocks o asse s and liabili ies o in e na ional equi y po olio in-
es men s as a pe cen age o GDP), in e na ional deb (measu ed as sum
o inwa d and ou wa d s ocks o in e na ional po olio deb secu i ies
and in e na ional bank loans and deposi s as a pe cen age o GDP), in-
e na ional ese es (which includes o eign exchange (excluding gold),
special d awing igh s holdings and ese e posi ion in he In e na ional
Mone a y Fund (IMF) as a pe cen age o GDP), and in e na ional income
paymen s (measu ed as sum o capi al and labou income o o eign
na ionals and om ab oad as a pe cen age o GDP). The index sco es
each coun y ou o 100, wi h a high sco e indica ing how mo e glo-
balised a coun y is. Ash a (2021) asse s ha , in a c oss-coun y
Table 2
Desc ip i e s a is ics du ing COVID-19 pandemic pe iod.
Va iable Mean Max Min SD OBS
SV 0.0001 0.0019 0.0000 0.0002 2255
XV 0.0000 0.0003 0.0000 0.0000 2255
VIX 27.0613 45.4100 19.9700 5.0491 2255
SR 0.0004 0.1027 −0.1723 0.0108 2255
XR −0.0005 0.0396 −0.0284 0.0062 2255
FG 57.1737 99.000 29.9260 19.8762 2255
No es: S anda d De ia ion is deno ed by SD, obse a ions a e depic ed by OBS, SV is S ock ma ke ola ili y, XV is Exchange a e ola ili y, VIX is Vola ili y index, SR is
S ock e u ns, XR is Exchange a e e u ns, FG is Financial globaliza ion, Min is Minimum, and Max is Maximum.
Sou ce: Au ho s’Cons uc ion (2023).
Table 1
Summa y o Va iable Desc ip ion.
Va iable Measu emen Sou ce
S ock ola ili y EGARCH gene a ed Au ho s’cons uc ion
Exchange a e ola ili y EGARCH gene a ed Au ho s’cons uc ion in es ing.com
Vola ili y Index CBOE Vola ili y Index
S ock e u ns Log (s ock p ice in pe iod /s ock p ice in pe iod −1) in es ing.com/Au ho s’cons uc ion
Exchange a e e u ns Log (exchange a e in pe iod /exchange a e in pe iod −1) in es ing.com/Au ho s’cons uc ion
Financial globaliza ion Financial globaliza ion, de ac o index 2022 KOF Globaliza ion Index –KOF Swiss Economic Ins i u e
SV*FG The in e ac i e e m o s ock ola ili y and inancial globaliza ion Au ho s’cons uc ion
XV*FG The in e ac i e e m o exchange a e ola ili y and inancial globaliza ion Au ho s’cons uc ion
No es: EGARCH is Exponen ial Gene alized Au o eg essi e Condi ional He e oscedas ic, SV is S ock Ma ke Vola ili y, XV is Exchange Ra e Vola ili y, and FG is
Financial Globaliza ion
M. Insaidoo e al. Resea ch in Globaliza ion 9 (2024) 100242
3
se ing, due o di e ences in ins i u ional and cul u al en i onmen s,
in es o s eac di e en ly o simila e en s. Resul an ly, his s udy
con ols o hese di e en ial eac ions by using Vola ili y index as
coun y ixed-e ec s a iable. Vola ili y index ha e been shown o ha e
in luence on hese ola ili ies. Feng e al. (2021) o ins ance, es ab-
lished ha , ola ili y index which depic s ea , inc eases exchange a e
ola ili y, whils Zhu e al. (2019) p o ide e idence o he US s ock
ma ke ola ili y being impac ed by ola ili y index.
P e-diagnos ic es s
Co ela ion ma ix and Va iance In la ion Fac o (VIF) es s
The pai wise co ela ion ma ix is conduc ed among he a iables in
he model. The objec i e o he co ela ion ma ix is o ensu e ha he e
is no mul icollinea i y among he exogenous a iables in he model. In
addi ion, he di ec ion and s eng h be ween any wo a iables in he
model is shown by his ma ix. Simila ly, a VIF es , which is ano he
ool o he de ec ion o mul icollinea i y in a panel eg ession model is
conduc ed.
C oss-sec ional dependence (CD) es s
The dependence on c oss-sec ions may a ise as a esul o ac o s such
as inancial globaliza ion and he mo emen o in e na ional capi al
be ween coun ies and egions. Consequen ly, ailing o conside he
po en ial c oss-sec ionali y in a panel da ase could esul in un eliable
and biased es ima es. This s udy employs CD es s in oduced by Pesa an
e al. (2008) and Pesa an (2021) and he Lang ange mul iplie (LM) es
a ibu ed o B eusch and Pagan (1980) o iden i y po en ial collinea i y
in he da ase .
Second-gene a ion uni oo es s
When CD is de ec ed wi hin a se ies, i is ad isable o pe o m
second-gene a ion uni oo es s like C oss-sec ion Im-Pesa an (CIPS)
and C oss-sec ion Augmen ed Dickey Fulle (CADF) uni oo es s, o
assess he s a iona i y o he se ies. The es s a e e ec i e in handling
c oss-sec ional dependence and he e ogenei y.
Panel coin eg a ion es s
The panel coin eg a ion es s in oduced by Ped oni (1999, 2004) a e
conduc ed o es o coin eg a ion among he a iables in he model.
The Ped oni (1999, 2004) panel coin eg a ion es is a s a is ical es
used o de e mine whe he wo o mo e ime se ies a e coin eg a ed,
which means hey sha e a long- un equilib ium ela ionship despi e
sho - e m de ia ions om his ela ionship. The es is used o iden i y
coin eg a ion among mul iple ime se ies in a panel da ase . The Ped oni
(1999, 2004) es is a obus al e na i e o he s anda d coin eg a ion
es , which can be sensi i e o ou lie s and he e oscedas ici y in he da a.
Model speci ica ion
To gene a e he ola ili y o s ock and o ex ma ke s, he Exponen ial
Gene alized Au o eg essi e Condi ional He e oscedas ic (EGARCH)
model a ibu ed o Nelson (1991), which ha e been widely used in
ola ili y ela ed s udies in inancial li e a u e is used (see Bal e al.,
2018; Jeb an, 2018; Ngo Thai, 2019; Insaidoo e al., 2021). The
imp o ed s abili y o op imiza ion ou ines and he absence o pa am-
e e es ic ions places he EGARCH model abo e o he models. The
EGARCH model is speci ied as:
In
σ
2
j, =
ω
+βjln(
σ
j, −1)2γ
ε
−1
σ
2
−1
√+θ[|
ε
−1|
σ
2
−1
√−
2
π
√](1)
whe e he condi ional a iance which cap u es a one-pe iod ahead
a iance es ima ed on any p io impo an e en is depic ed by
σ
2
j, , as
shown in equa ion (1). The condi ional densi y unc ion is deno ed by
ω
, whils he GARCH e ec which cap u es he model’s symme ic e -
ec is depic ed by θ.βcap u es he pe se e ance in condi ional ola-
ili y, whils he le e age e ec is deno ed by γ.
In pu sui o obus ness o esul s, wo empi ical app oaches a e used
in his s udy. The Panel Fully Modi ied O dina y Leas Squa es (Panel
FMOLS) and he Panel Dynamic O dina y Leas Squa es (Panel DOLS).
Panel FMOLS was used due o i s abili y o handle ime-in a ian un-
obse ed he e ogenei y, imp o ed es ima ion o eg ession coe icien s,
obus ness o omi ed a iable bias, abili y o handle panel da a wi h
mul iple obse a ions pe uni , and lexibili y in modelling he e o
e m. Addi ionally, he Panel DOLS abili y o es ima e bo h sho - e m
and long- e m ela ionship, makes i a e sa ile ool o analysing dy-
namic ela ionships. In addi ion, Panel DOLS abili y o handle missing
da a and non-s a iona i y, makes i a use ul app oach o analysing such
da ase . The unc ional o m o Panel FMOLS and Panel DOLS a e p e-
sen ed as:
yi =γi+ji φ+ ∪i i=1,⋯.11, =11Ma ch2020−30Decembe 2020
(2)
Table 3
Pai wise Co ela ion Ma ix.
Va iables SV XV VIX SR XR FG
SV 1.0000
XV 0.2426*** 1.0000
VIX 0.3280*** 0.1216*** 1.0000
SR 0.0009 0.0499** −0.0802*** 1.0000
XR 0.0091 −0.0913*** 0.0874*** −0.0791*** 1.0000
FG 0.2055*** 0.4861*** −0.0000 0.0252 −0.0364* 1.0000
No es: *** p <0.01, ** p <0.05, * p <0.10, SV ep esen s S ock ola ili y, XV deno es Exchange Ra e ola ili y, VIX e e s o Vola ili y Index, SR depic s S ock e u ns,
XR ep esen s Exchange Ra e e u ns, and FG is Financial Globaliza ion.
Sou ce: Au ho s’Cons uc ion (2023).
Table 4
Va iance In la ion Fac o .
Va iable Model 6 Va iable Model 8
Exch. Ra e Vola ili y 1.34 S ock ola ili y 1.18
Fin. Globaliza ion 1.32 Vola ili y Index 1.14
Vola ili y Index 1.03 Fin. Globaliza ion 1.05
S ock e u ns 1.01 Exch. Ra e Re u ns 1.01
Mean VIF 1.17 Mean VIF 1.09
No es: Model 6 uses S ock ola ili y as he dependen a iable, and Model 8 uses Exchange Ra e ola ili y as he dependen a iable.
Sou ce: Au ho s’Cons uc ion (2023).
M. Insaidoo e al. Resea ch in Globaliza ion 9 (2024) 100242
4
he e φ ep esen s he slope symbol wi h a dimension o (m, 1), which
deno es a ma ix o size (1, 1), and also un eils s a iona y dis u bance
e ms, whils γi ep esen s indi idual- ixed e ec s p esen ed as a ec o
ji (m, 1) wi hin in eg a ed schemes o le el one, deno ed as I(1) o all I,
whe e ji =ji −1+ ∪i .
Equa ion (2) indica es coin eg a ion eg ession which implies yi is
co-in eg a ed wi h ji . An asymp o ically no mal beha iou o FMOLS
and DOLS es ima o s is epo ed. The equa ion o FMOLS ec i ies he
issue o se ial co ela ion and endogenei y o OLS eg ession. The
ma hema ical o m o he Panel FMOLS and he Panel DOLS a e p e-
sen ed below:
ζFMOLS −[∑
N
i=1∑
T
=1
(
μ
i −
μ
i)]1[∑
N
i=1{∑
T
=1
(
μ
i −
μ
i)yi +TΔu}] (3)
whe e y.i is he ans o med o m o he yi o ec i y endogenei y issue
and Δ∊Uindica es a se ial co ela ion e m. Likewise, DOLS es ima o by
de aul akes ca e o au oco ela ion and endogenei y issue in panel da a
eg ession as ollows:
yi =γi+φl i +∑
d
h=d
ihΔ i +k+
υ
i =1,⋯,Ti =1,⋯,N(4)
whe e
υ
i shows he de ia ions, φindica es i m- ela ed impac and ih
shows alues o lag o lead o i s -di e ence independen a iables.
DOLS es ima o is shown as ollows:
ζDOLS =∑
N
=1{Si Sʹ
i }1∑
=1
T
{Si z.i }(5)
whe e Si = { li −liΔli, − ,⋯,Δli, + }is 2{ +1} ×1 eg esso ’s ec o .
Empi ical me hod
Pu suan o Al-Awadhi e al. (2020) and Ash a (2020), his s udy
employs panel-da a eg ession me hodology due o i s sui abili y in
empi ical analysis in compa ison o he con en ional e en -s udy ap-
p oaches. Woold idge (2010), and Hsiao (2014) posi s ha he depen-
den and independen a iables’ ime- a ian associa ions a e iden i ied,
and he p oblems o indi idual he e ogenei y, mul icollinea i y, and
es ima ion biases a e minimized wi h he use o panel-da a eg ession
app oach. To examine how he s ock ma ke ola ili y has been
impac ed by exchange a e ola ili y, he panel-da a eg ession models
used a e as ollows:
SVj, =
α
01 +
α
02XVj, +
α
03VIX +
α
04SRj, +
α
05FGj, +
ε
0j, (6)
whe e SVj, in equa ion (6) is s ock ma ke ola ili y o coun y ja ime
,XVj, depic s exchange a e ola ili y o coun y ja ime ,VIX de-
pic s Vola ili y Index a ime ,SRj, is s ock e u ns o coun y ja ime ,
inancial globaliza ion o coun y ja ime is depic ed by FGj, ,
α
01,
…,
α
05 a e he eg ession coe icien s o be es ima ed, and
ε
0j, deno es
Table 5
C oss-sec ional dependence esul s.
Va iables B eusch-Pagan LM Pesa an Scaled LM Pesa an CD
SVi 405.5294*** 33.42167*** 1.445496
XVi 1152.636*** 104.6555*** 0.620734
VIX 353.0414*** 28.41713*** 7.966238***
SRi 63.82323 0.841262 0.371058
XRi 58.72863 0.355511 −0.631068
No e: *** p <0.01, SV is S ock ma ke ola ili y, XV is Exchange a e ola ili y, VIX is Vola ili y index, SR is S ock e u ns, and XR is Exchange a e e u ns.
Sou ce: Au ho s’Cons uc ion (2023).
Table 6
CADF and CIPS uni oo es esul s.
CADF CIPS
Va iables Le el 1s di . Le el 1s di .
SVi −3.534*** −6.090*** −2.942*** −6.190***
XVi −4.002*** −6.190*** −4.364*** −6.190***
VIX −6.190*** −6.190*** −6.190*** −6.190***
SRi −6.190*** −6.190*** −6.190*** −6.190***
XRi −6.190*** −6.190*** −6.190*** −6.190***
FGi 0.514 −4.590*** 0.511 −4.590***
No e: *** p <0.01, SV is S ock ma ke ola ili y, XV is Exchange a e ola ili y, VIX is Vola ili y index, SR is S ock e u ns, XR is Exchange a e e u ns, and FG is
Financial Globaliza ion.
Sou ce: Au ho s’Cons uc ion (2023).
Table 7
Ped oni panel coin eg a ion es esul s (S ock ma ke ola ili y as dependen a iable).
Wi hin Dimension (Panel) S a is ics Weigh ed S a is ics
-s a is ic 2.554*** 0.282
ho-s a is ic −42.912*** −44.629***
PP-s a is ic −28.503*** −26.652***
ADF-s a is ic −27.562*** −19.631***
Be ween Dimension (G oup)
ho-s a is ic −42.138***
PP-s a is ic −27.495***
ADF-s a is ic −15.436***
No e: *** p <0.01.
Sou ce: Au ho s’Cons uc ion (2023).
M. Insaidoo e al. Resea ch in Globaliza ion 9 (2024) 100242
5
he e o e m. To e alua e he mode a ing ole o inancial globaliza-
ion in he co-mo emen o exchange a e ola ili y and s ock ma ke
ola ili y, equa ion (6) is modi ied as ollows:
SVj, =
α
11 +
α
12XVj, +
α
13VIX +
α
14SRj, +
α
15FGj, +
α
16XVj, *FGj, +
ε
1j,
(7)
whe e
α
11,…,
α
16 a e he eg ession coe icien s o be es ima ed, XVj, *
FGj, is he in e ac i e e m o exchange a e ola ili y and inancial
globaliza ion, wi h all he o he a iables in equa ion (7) emaining
same as he ones in Eq. (6).
Fu he , o examine he impac o s ock ma ke ola ili y on ex-
change a e ola ili y, e e sal panel-da a eg ession models a e used as
ollows:
XVj, =
α
21 +
α
22SVj, +
α
23VIX +
α
24XRj, +
α
25FGj, +
ε
2j, (8)
whe e XRj, is exchange a e e u ns o coun y ja ime ,
α
21,…,
α
25 a e
he eg ession coe icien s o be es ima ed, wi h all he o he a iables in
Eq. (8) emaining same as he ones in Eq. (6). Finally, o e alua e he
mode a ing ole o inancial globaliza ion in he e ec o s ock ma ke
ola ili y on exchange a e ola ili y, Eq. (8) is modi ied as ollows:
XVj, =
α
31 +
α
32SVj, +
α
33VIX +
α
34XRj, +
α
35FGj, +
α
36SVj, *FGj, +
ε
3j,
(9)
whe e
α
31,…,
α
36 a e he eg ession coe icien s o be es ima ed, SVj, *
FGj, is he in e ac i e e m o s ock ma ke ola ili y and inancial
globaliza ion, wi h all he o he a iables in Eq. (9) emaining same as
he ones in Eq. (8).
Eq. (7) is pa ially di e en ia ed wi h espec o Exchange a e
ola ili y which ga e ise o Eq. (10). This helped us o iden i y he ne
e ec o Exchange a e ola ili y on S ock ma ke ola ili y.
∂
SVj,
∂
XVj,
=a12 +a16FGj, (10)
he e
∂
is he di e ence ope a o ; SVj, is S ock ma ke ola ili y; XVj, is
Exchange a e ola ili y and FGj, is he a e age alue o inancial
globaliza ion.
Simila ly, Eq. (9) is pa ially di e en ia ed wi h espec o S ock
ma ke ola ili y, which ga e ise o equa ion (11). This helped us o
iden i y he ne e ec o S ock ma ke ola ili y on Exchange a e
ola ili y.
∂
XVj,
∂
SVj,
=a32 +a36FGj, (11)
The de ini ion o a iables in Eq. (11) a e he same as in Eq. (10).
Empi ical esul s
This sec ion begin by analyzing he desc ip i e s a is ics o s ock
ma ke ola ili y, exchange a e ola ili y, ola ili y index, s ock
e u ns, exchange a e e u ns, and inancial globaliza ion, du ing he
COVID-19 pandemic pe iod. This is hen ollowed by an analysis o he
esul s o he p e-diagnos ic es s. Following his, he esul s o he es-
ima es o he e ec o exchange a e ola ili y on s ock ma ke ola ili y
a e p esen ed and discussed. Fu he , he esul s o he es ima es o he
in luence o s ock ma ke ola ili y on exchange a e ola ili y a e p e-
sen ed and discussed. Finally, he esul s o he es ima es o he
mode a ing ole o inancial globaliza ion in he co-mo emen o s ock
ma ke ola ili y and exchange a e ola ili y a e p esen ed and
discussed.
Analysis o desc ip i e s a is ics
Table 2 epo s a se o desc ip i e s a is ics on s ock ma ke ola-
ili y, exchange a e ola ili y, ola ili y index, s ock e u ns, exchange
a e e u ns, and inancial globaliza ion, du ing he COVID-19 pe iod.
The a e age ola ili y eco ded o he s ock and o ex ma ke s is 0.0001
and 0.0000 espec i ely, wi h minimum ola ili y o 0.0000 o bo h
ma ke s. The s anda d de ia ions o s ock and o ex ma ke s a e gi en as
0.0002 and 0.0000 espec i ely. The maximum ola ili y o s ock and
o ex ma ke s a e gi en as 0.0019 and 0.0003 espec i ely. The a e age,
s anda d de ia ion, minimum, and maximum ola ili y index is gi en as
27.0613, 5.0491, 19.9700 and 45.4100 espec i ely. The a e age e u n
o he s ock ma ke s is gi en as 0.0004, wi h minimum, maximum, and
s anda d de ia ion o −0.1723, 0.1027, and 0.0108 espec i ely. The
a e age e u n o he o ex ma ke s is −0.0005, wi h s anda d de ia ion
o 0.0062, minimum e u ns o −0.0284 and maximum e u ns o
0.0396. The minimum and maximum index o inancial globaliza ion
achie ed is 29.9260 and 99.0000 espec i ely, wi h a mean index o
57.1737 and s anda d de ia ion o 19.8762. The a e age index o
inancial globaliza ion implies ha , whils he A ican egion s ands o
mode a ely enjoy i s posi i es, such as inc eased access o capi al,
imp o emen in inancial ma ke e iciency, inc eased compe i ion, and
isk di e si ica ion, he egion also has he po en ial o be empe a ely
ulne able o ex e nal shocks.
Resul s o p e-diagnos ic es s
In Table 3, he s udy epo s on he esul s o he pai wise co ela ion
ma ix o he COVID-19 pandemic pe iod. The objec i e o he co e-
la ion ma ix is o ensu e ha , he e is no mul icollinea i y among he
exogenous a iables in he model. In addi ion, he di ec ion and s eng h
be ween any wo a iables in he model is shown by his ma ix. The
esul s in Table 3 clea ly sugges , ha he exogenous a iables gene ally
show s ong co ela ion and no p oblem o mul icollinea i y. Acco ding
o K amme (2010), he absence o mul icollinea i y is a i med when
he co ela ion coe icien among independen a iables emains below
0.85. Examina ion o he co ela ion ma ix in Table 3 o his s udy
e eals ha , all coe icien s a e below 0.85, he eby indica ing an
absence o mul icollinea i y conce ns.
Table 8
Ped oni panel coin eg a ion es esul s (Exchange a e ola ili y as dependen a iable).
Wi hin Dimension (Panel) S a is ics Weigh ed S a is ics
-s a is ic 1.123 −0.628
ho-s a is ic −38.041*** −40.150***
PP-s a is ic −25.286*** −25.242***
ADF-s a is ic −21.777*** −12.506***
Be ween Dimension (G oup)
ho-s a is ic −40.212***
PP-s a is ic −27.841***
ADF-s a is ic −12.710***
No e: *** p <0.01.
Sou ce: Au ho s’Cons uc ion (2023).
M. Insaidoo e al. Resea ch in Globaliza ion 9 (2024) 100242
6
Simila ly, Table 4 epo s on he esul s o he a iance in la ion
ac o (VIF), which is ano he ool o he de ec ion o mul icollinea i y
in a eg ession model. A VIF alue equal o less han 10 indica e an
absence o mul icollinea i y, which implies consis ency in he s anda d
e o s o he es ima ed model. F om Table 4, he VIF o he a iables o
he COVID-19 pandemic pe iod a e close o 1. This indica es an absence
o mul icollinea i y and hus, sugges s ha he s anda d e o s o he
es ima ed model a e consis en . The es ima ed model eg essed s ock
ma ke ola ili y on all a iables in model 6, and model 8 eg essed
exchange a e ola ili y on all a iables.
The esul s o he panel c oss-sec ional dependence (CD) es p e-
sen ed in Table 5, indica e ha , e en a he 1 % le el o signi icance, he
null hypo hesis o CD is ejec ed o S ock ma ke ola ili y, Exchange
a e ola ili y, and Vola ili y index. This ejec ion implies he p esence
o CD and sugges s ha he i s -gene a ion panel uni oo amewo k is
no sui able o his s udy. Howe e , he esul s indica e ha S ock
ma ke e u ns and Exchange a e e u ns does no su e om CD. As
highligh ed by B ei ung and Pesa an (2008), CD can eme ge due o
spa ial spillo e e ec s and unobse able ac o s among na ions and
egions.
The second-gene a ion uni oo es s, speci ically (C oss-sec ion
Augmen ed Dickey-Fulle (CADF) and C oss-sec ion Im-Pesa an (CIPS)
we e conduc ed. The indings indica e ha all he a iables, excep
inancial globaliza ion, exhibi s s a iona i y a le el. Financial global-
iza ion became s a iona y a i s di e ence. The esul s o he CADF and
CIPS es s a e p esen ed in Table 6.
A e pe o ming uni oo es s, we u ilized he Ped oni (1999, 2004)
panel coin eg a ion es s o de e mine he p esence o coin eg a ion
ela ionship among he a iables in he model. Table 7 and Table 8
epo he indings o he panel coin eg a ion es s using s ock ma ke
ola ili y and exchange a e ola ili y espec i ely as dependen a i-
able. As e idenced in Table 7, en o he ele en s a is ics demons a e
s a is ically signi ican alues a a 1 % signi icance le el, whils in
Table 8, nine o he ele en s a is ics show s a is ically signi ican alues
a 1 % signi icance le el. These s a is ics p o ide e idence o long- e m
ela ionship among hese a iables. Consequen ly, he null hypo hesis o
no coin eg a ion among he a iables in he wo models a e ejec ed.
D i e s o s ock ma ke ola ili y
Table 9 epo s he main empi ical esul s o he Panel FMOLS and
Panel DOLS, using s ock ma ke ola ili y as he dependen a iable.
Model 6 is he baseline speci ica ion. Fo model 6 and model 7 o bo h
me hodologies, ola ili y index has posi i e and signi ican ela ionship
wi h s ock ma ke ola ili y. This is in andem wi h he indings o Zhu
e al. (2019), ha p o ides e idence o he US s ock ma ke ola ili y
being impac ed by ola ili y index. Fu he , model 6 and model 7 o
bo h Panel FMOLS and Panel DOLS esul s show a posi i e and signi i-
can associa ion o s ock ma ke e u ns wi h s ock ma ke ola ili y.
This co obo a es he indings o Al-Rjoub and Azzam 2012, ha ound a
posi i e associa ion o s ock e u ns wi h s ock ma ke ola ili y in
Jo dan. In addi ion, he esul s o model 6 and model 7 o bo h me h-
odologies, show signi ican and posi i e in luence o inancial global-
iza ion on s ock ma ke ola ili y. This con adic s he indings o
Co della and Ospino Rojas (2017), which using 84 coun ies e ealed
ha inancial globaliza ion educes s ock ma ke ola ili y.
Long- un ola ili y om o ex o s ock ma ke
As shown in he esul s o model 6 o bo h Panel FMOLS and Panel
DOLS om Table 9, he exchange a e ola ili y en e s posi i e and
signi ican , showing a posi i e co-mo emen o he wo ola ili ies. This
mi o s he esul s o Sui and Sun (2016), ha es ablished in luence o
o ex ola ili y on s ock ma ke ola ili y o BRICS coun ies du ing he
2007/08 global inancial c isis pe iod. This esul is also in andem wi h
he indings o Mikhaylo , 2018,Fasanya and Akinde, 2019, and Ba -
anidha an and Alex, 2020, ha showed posi i e e ec o o ex ola ili y
on s ock ma ke ola ili y o B azil and Russia, Nige ia, and Sou h A -
ica espec i ely, in a non-c isis pe iod. This esul also con i ms he
indings o Van De Wes huizen e al. (2022) and Rai and Ga g (2022)
ha ound posi i e e ec s o o ex ola ili y on s ock ma ke ola ili y
o he Sou h A ica and BRIICS coun ies espec i ely, in he COVID-19
pandemic pe iod. On he con a y, he esul s o model 7 o bo h
me hodologies indica e nega i e and signi ican associa ion o exchange
a e ola ili y wi h s ock ma ke ola ili y as e idenced in Table 9.
Whils exchange a e ola ili y ini ially inc eases s ock ma ke ola ili y
due o isk pe cep ions occasioned by COVID-19, inancial globaliza ion
in oduces mechanisms, such as hedging, di e si ica ion, and ma ke
in eg a ion ha can mi iga e hese e ec s o e ime. This explains he
change o ela ionship om posi i e o nega i e when he in e ac ion
e m (exchange a e ola ili y* inancial globaliza ion) was inco po a ed
in model 7. This inco po a ion is aimed a examining he mode a ing
ole o inancial globaliza ion in he long- un ela ionship be ween ex-
change a e ola ili y and s ock ma ke ola ili y. The esul s o model 7
in bo h he Panel FMOLS and Panel DOLS show ha , inancial global-
iza ion mode a es a signi ican and posi i e in luence o exchange a e
Table 9
Panel FMOLS and Panel DOLS Resul s (S ock ola ili y as dependen a iable).
Panel FMOLS Panel DOLS
Va iables Model 6 Model 7 Model 6 Model 7
Exchange Ra e ol. 0.6531*** −4.9027*** 0.6885*** −5.2559***
(0.1427) (0.6483) (0.1430) (0.8776)
Vola ili y Index 0.0000*** 0.0000*** 0.0000*** 0.0000***
(0.0000) (0.0000) (0.0000) (0.0000)
S ock e u ns 0.0006* 0.0006* 0.0013** 0.0011*
(0.0004) (0.0000) (0.0006) (0.0006)
Fin. Globaliza ion 0.0000*** 0.0000*** 0.0000*** 0.0000*
(0.0000) (0.0000) (0.0000) (0.0000)
XV*FG 0.0835*** 0.0902***
(0.0099) (0.0129)
Obse a ions 2244 2244 2222 2222
R
2
0.3482 0.3763 0.5699 0.6411
Adjus ed R
2
0.3441 0.3721 0.5397 0.6095
SER 0.0001 0.0001 0.0001 0.0000
LRV 0.0000 0.0000 0.0000 0.0000
Ne E ec − − 0.1287 − − 0.0988
No es: Values in he pa en hesis a e he obus s anda d e o ; *** p <0.01, ** p <0.05, * p <0.10, XV*FG ep esen s an in e ac ion e m o Exchange Ra e ola ili y
and Financial Globaliza ion
Sou ce: Au ho s’Cons uc ion (2023).
M. Insaidoo e al. Resea ch in Globaliza ion 9 (2024) 100242
7
ola ili y on s ock ma ke ola ili y.
D i e s o exchange a e ola ili y
Table 10 epo s he Panel FMOLS and Panel DOLS empi ical esul s,
using exchange a e ola ili y as he dependen a iable. Model 8 is he
baseline speci ica ion. The esul s o bo h models and me hodologies
indica e posi i e and signi ican ela ionship be ween ola ili y index
and exchange a e ola ili y. This is in andem wi h he indings o Feng
e al. (2021), which es ablished signi ican and posi i e ela ionship
be ween ola ili y index and exchange a e ola ili y. Fu he , he e-
sul s o bo h models and me hodologies, e eal signi ican and nega i e
in luence o exchange a e e u ns on exchange a e ola ili y. This
mi o s he indings o Mohammed e al. (2021), which es ablished a
nega i e ela ionship in Ghana. Mo eo e , he esul s o bo h models
and me hodologies, show he exis ence o signi ican and posi i e ela-
ionship be ween inancial globaliza ion and exchange a e ola ili y.
This is in con as wi h he indings o Gaies e al. (2020), which
es ablished a nega i e associa ion in selec ed eme ging and de eloping
coun ies.
Long- un ola ili y om s ock o o ex ma ke
The esul s o bo h models and me hodologies as p esen ed in
Table 10, show signi ican and posi i e co-mo emen o s ock ma ke
ola ili y and exchange a e ola ili y. This con adic s he indings o
Sui and Sun (2016), ha ound no e idence o e ec o s ock ma ke
ola ili y on o ex ma ke ola ili y in BRICS coun ies, du ing he 2007/
08 GFC pe iod. This esul s also con i m he indings o Qin e al. (2018)
and Singh e al. (2021), ha showed posi i e in luence o s ock ma ke
ola ili y on o ex ma ke ola ili y in China and Japan, and in India,
China and Sou h A ica espec i ely, in a anquil pe iod, and he ind-
ings o Van De Wes huizen e al. (2022), which es ablished posi i e
e ec o s ock ma ke ola ili y on o ex ma ke ola ili y in Sou h A -
ica, du ing he COVID-19 pandemic pe iod. This s udy includes an
in e ac ion e m (s ock ma ke ola ili y* inancial globaliza ion) in
model 9 o examine he mode a ing ole o inancial globaliza ion in he
in luence o s ock ma ke ola ili y on exchange a e ola ili y. The e-
sul s o model 9 in bo h me hodologies show ha , inancial globaliza ion
has signi ican and posi i e mode a ing ole in he co-mo emen o s ock
ma ke ola ili y and exchange a e ola ili y.
Long- un ola ili y be ween o ex and s ock ma ke s
Gleaning om he esul s o Table 9 and Table 10, he long- un
ola ili y be ween s ock and o ex ma ke s is bidi ec ional, du ing he
COVID-19 pandemic pe iod. This esul is in andem wi h he indings o
Bal e al. (2018), ha e ealed signi ican associa ion o s ock and o ex
ma ke ola ili y, du ing he 2007/08 GFC pe iod, and he indings o
Qin e al. (2018), and Singh e al. (2021), ha es ablished signi ican
ela ionship be ween o ex and s ock ma ke s, du ing anquil pe iods.
Theo e ically, he bidi ec ional ola ili y be ween o ex and s ock
ma ke s in A ica as es ablished by his s udy, backs he heo ies o bo h
“s ock-o ien ed”and “ low-o ien ed”models. Whils he o me model
posi s ha s ock p ices pe suade he exchange a e, he pe suasion o he
s ock p ices by he exchange a e as s ipula ed by he la e model is
suppo ed by his s udy. An economic a ionale unde pinning his esul
may be sou ced om he in o ma ional ansmission wo kings o he
“ low-o ien ed”model, which posi s ha , he eal income and ou pu o
an economy a e a ec ed, h ough he e ec o exchange a e luc ua-
ions on he compe i i eness o local i ms in he in e na ional ma ke s.
In addi ion, as he p esen alue o u u e cash lows de e mines s ock
p ices, he s ock ma ke e en ually esponds o he luc ua ions in he
exchange a e. The s ock ma ke s eac ions o changes in he exchange
a e, du ing c isis pe iods a e no su p ising, pa icula ly in he COVID-
19 pandemic pe iod. Fo he o me , Do e al. (2015) asse s ha , he
con inuous and signi ican eal g ow h a e in he US be ween 2002 o
middle o 2009, s eng hened he US dolla , which is he wo ld base
cu ency. Simila ly, Mille (2020) posi s ha , he sa e-ha en p ope y o
he US dolla , was highly exhibi ed due o i s high demand du ing he
COVID-19 c isis. These phenomena unde pin he no iceable in o ma-
ional lows om o ex o s ock ma ke s du ing c isis pe iods as
expec ed.
Financial globaliza ion and i s mode a ing ole
Fo he di ec e ec , inancial globaliza ion is e ealed o ha e sig-
ni ican and posi i e in luence on s ock ma ke ola ili y. This implies
ha , in u bulen pe iods, such as COVID-19 c isis, in he A ican se ing,
inancial globaliza ion se es as a ehicle o con agion in inc easing
s ock ma ke ola ili y. Fu he , inancial globaliza ion indi ec e ec
ia he o ex ma ke is posi i e in he COVID-19 pandemic pe iod. This
implies ha , he posi i e di ec in luence o inancial globaliza ion on
s ock ma ke ola ili y is ein o ced by he posi i e indi ec in luence o
inancial globaliza ion on s ock ma ke ola ili y ia exchange a e
ola ili y. This inding is in con o mi y wi h he s udy o Co della and
Table 10
Panel FMOLS and Panel DOLS Resul s (Exchange Ra e ola ili y as dependen a iable).
Panel FMOLS Panel DOLS
Va iables Model 8 Model 9 Model 8 Model 9
S ock ola ili y 0.0402*** 0.1043*** 0.0685*** 0.1882***
(0.0088) (0.0265) (0.0125) (0.0399)
Vola ili y Index 0.0000*** 0.0000*** 0.0000** 0.0000*
(0.0000) (0.0000) (0.0000) (0.0000)
Exch. Ra e e u ns −0.0005*** −0.0005*** −0.0007** −0.0005
(0.0002) (0.0002) (0.0003) (0.0003)
Fin. Globaliza ion 0.0000*** 0.0000*** 0.0000*** 0.0000***
(0.0000) (0.0000) (0.0003) (0.0000)
SV*FG −0.0009** −0.0013**
(0.0003) (0.0005)
Obse a ions 2244 2244 2222 2222
R
2
0.6179 0.6203 0.7024 0.7417
Adjus ed R
2
0.6156 0.6177 0.6815 0.7189
SER 0.0000 0.0000 0.0000 0.0000
LRV 0.0000 0.0000 0.0000 0.0000
Ne E ec 0.0528 0.1139
No es: Values in he pa en hesis a e he obus s anda d e o ; *** p <0.01, ** p <0.05, * p <0.10, SV*FG ep esen s an in e ac ion e m o S ock ola ili y and
Financial Globaliza ion
Sou ce: Au ho s’Cons uc ion (2023).
M. Insaidoo e al. Resea ch in Globaliza ion 9 (2024) 100242
8
