In this paper we investigate the nature of the relationship between stock prices and spot exchange rates using recent developments in time series modelling. We are able to explain why traditional econometric techniques show little correlation between bilateral exchange rates and stock prices....

This study investigates the co-variability of changes in nominal interest rates for the main EC countries between April 1974 and January 1992, using principal components analysis. We find that there is evidence of increased monetary interdependence and greater capital market integration, but...