Exchange Rates and Asset Prices in a Global Demand System

Ralph Koijen and Motohiro Yogo
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Ralph Koijen: University of Chicago

Working Papers from Princeton University. Economics Department.

Abstract: Using international holdings data, we estimate a demand system for financial assets across 36 countries. The demand system provides a unified framework for decomposing variation in exchange rates, long-term yields, and stock prices, interpreting major economic events such as the European sovereign debt crisis, and estimating the convenience yield on US assets. Macro variables and policy variables (i.e., short-term rates, debt quantities, and foreign exchange reserves) account for 55 percent of the variation in exchange rates, 57 percent of long-term yields, and 69 percent of stock prices. The average convenience yield is 2.15 percent on US long-term debt and 1.70 percent on US equity.

Keywords: demand system; international (search for similar items in EconPapers)
JEL-codes: E52 F31 G12 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-cwa, nep-fdg, nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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https://www.nber.org/system/files/working_papers/w27342/w27342.pdf

Related works:
Working Paper: Exchange Rates and Asset Prices in a Global Demand System (2020)
Working Paper: Exchange Rates and Asset Prices in a Global Demand System (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2020-33

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