Exchange Market Pressure, Stock Prices, and Commodity Prices East of the Euro

Document Type


Publication Date



Aim/purpose – This paper aims to examine connections between the exchange, equi- ty, commodity and commodity markets of a set of Central and Eastern European (CEE) economies using monthly time-series data. In particular, we examine whether stock – or commodity – price changes might put pressure on these currencies to depreciate, and whether these pressures are transmitted within the region or from larger neighbors.

Design/methodology/approach – This paper creates monthly indices of Ex-change Market Pressure (EMP) from 1998 to 2017 using a combination of currency depreciation, reserve losses, and changes in interest-rate differentials for the Czech Republic, Hungary, Poland, and Ukraine, Bulgaria, and Romania. After examining these indices for evidence of currency ‘crises’, and their components for evidence of changes in currency policy, Vector Autoregressive (VAR) methods such as Granger causality and impulse-response functions are used to examine connections between EMP, domestic and foreign stock re- turns, and changes in commodity prices in the first four countries listed.

Findings – While EMP increased in 2008, and the degree of central banks’ currency- -market interventions decreased afterward, this paper uncovers key differences among countries. In particular, the Czech Republic is relatively insulated from international transmissions, while Hungary is more susceptible to global spillovers and Poland is ex- posed to events originating elsewhere in the CEE region. Ukraine shows bidirectional causality between its EMP and stock indices, and finds that pressure on the hryvnia in- creases if commodity or oil prices decline.

Research implications/limitations – This study adds to the relatively limited literature regarding this region, and highlights particular vulnerabilities for both individual countries and specific neighbors; further research is necessary to uncover the channels of trans- mission using economic modeling.

Originality/value/contribution – This study explicitly models two major economic processes in a part of the world that is relatively rarely examined. These include events in Central and Eastern European exchange markets and central bank intervention, and also interlinkages among regional currency and equity markets, foreign equity markets, and global commodity prices. This will allow policymakers to assess integration between these countries, the rest of the European Union, and the global economy.


This article available here is the publisher version.



Publication Title

Journal of Economics and Management

Volume Number


Issue Number


First Page


Last Page