**3.5 Model development and variable description**

The research employs vector error correction (VEC) methodology to study the magnitude of the effect and the response to the impulse function of the rate of exchange concerning stock prices. This is done after determining the variables are cointegrated. Vector error correction model (VECM) is used to capture the evolution and the interdependencies between multiple time series, generalizing the univariate AR models. There is a symmetrical treatment of all the variables adopted for the VECM in the study via the addition in every one of the given equation in determining process on the bases of its lags as well as the lags of all other variables.
