The Impact of Coup d'états on the Relationship between Stock Market and Exchange Rate: Evidence from Thailand

Abstract

This study investigates a dynamic relationship between the Stock Exchange of Thailand (SET) index and the exchange rate of Thai Baht and US dollar (THB/USD) by using daily data for the period of Coup d'état in Thailand during 2006 to 2016. In the long run test, the Johansen's cointegration analysis shows significant long-run relationship during the pre-Coup d'état 2006 and the pre-Coup d'état 2014, but the Coup d'état 2006 and the Coup d'état 2014 are vice versa. The Granger causality tests in all periods show uni-directional causality except the Coup d'état 2006. In the short run test, the SET index shocks in all periods negatively affect the exchange rate of THB/USD except the Coup d'état 2014. In summary, the Coup d'états influence on the compose of the SET index and the exchange rate of THB/USD in both long-run and short-run relationship based on the evidence from Thailand.