International Capital Flows and Speculation

Rob Hayward and Andros Gregoriou
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Rob Hayward: School of Business and Law, University of Brighton, Brighton BN2 4AT, UK
Andros Gregoriou: School of Business and Law, University of Brighton, Brighton BN2 4AT, UK

JRFM, 2021, vol. 14, issue 5, 1-12

Abstract: In response to questions about the relative importance of different types of capital flow for international competitiveness, we develop a structural vector auto-regressive model of the real exchange rate and international capital flows. We reveal that innovations to speculative sentiment cause changes in competitiveness. We report that speculation replaces the effect of equity, bond and most of the interest rate effect. The results show that international speculative sentiment is an important contributor to exchange rate and that monetary and regulatory authorities should find ways of measuring and understanding banking and financial flows.

Keywords: exchange rates; currency crisis; capital flow; VAR (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
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