Testing for nonlinearity of the relationship between stock prices and exchange rate in Romania

The aim of this paper is to test the nonlinearity of the relation between the stock price in Romania and the nominal Romanian Leu against Euro from March 2000 to March 2014. The empirical evidence shows that there is a long-run equilibrium between the two variables during the time period investigated. There exist also short-run relationships that were found to be nonlinear in variables involved (exchange rate and stock price) and also regarding the error correction mechanism.