The analysis of time varying correlation between stock index and
exchange rates in the context of international investments was been well
researched in the literature in last few years. In this paper, we study the
interdependence of stock index and exchange rate for the Tunis during the
global financial crisis. Hence, we approve a DCC-FIAPARCH model to study the
dynamic conditional correlation, throughout the period spanning from January 1,
2006 until January 1, 2017. The empirical results recommend asymmetric
responses in correlations between the stock index and exchange rate from
Tunisia. Moreover, the results indicate an increase of exchange rates and stock
index correlations through the crisis periods, telling the different currencies
vulnerability. Finally, we find some significant decreases in the estimated
dynamic correlations, indicating the existence of a “currency contagion effect”
during turmoil periods.
JEL classification numbers: G32, G33, C22, C53, G15.
Keywords: volatility, DCC-FIAPARCH, Global financial crisis, exchange
rates, stock index and currency contagion.