Real financial market exchange rates and capital flows

Arbeitspapier

Foreign exchange rates, asset prices and capital movements are expected to be closely related to each other as international capital markets become more and more integrated. This paper provides new empirical evidence from an index of exchange-rate adjusted cross-country asset price ratios, which may be interpreted as a real effective financial exchange rate. The integrated stock-flow approach reveals that a county's real effective financial exchange rate is co-integrated with international investors' net foreign holding of its assets. The associated error correction equations have useful interpretations against the backdrop of uncovered return parity and investor portfolio rebalancing behavior.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1945

Classification and Topics

• Classification: Wirtschaft ; Foreign Exchange ; International Financial Markets ; Central Banks and Their Policies
• Subject: Real Effective Exchange Rate ; Capital Flows ; Financial Markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gelman, Maria ; Jochem, Axel ; Reitz, Stefan ; Taylor, Mark P.
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/100074
• Last update: 10.03.2025, 11:45 AM CET