Exchange Rates and Net Portfolio Flows: A Markov-Switching Approach

Faek Menla Ali, Fabio Spagnolo and Nicola Spagnolo
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Faek Menla Ali: Brunel University London

Chapter Chapter 5 in Hidden Markov Models in Finance, 2014, pp 117-132 from Springer

Abstract: Abstract In this paper we investigate the impact of net bond and equity portfolio flows on exchange rate changes. Two-state Markov-switching models are estimated for Canada, the euro area, Japan and the UK exchange rates vis-à-vis the US dollar. Our results suggest that the relationship between net portfolio flows and exchange rate changes is nonlinear for all currencies considered but Canada.

Keywords: Exchange Rate; Euro Area; Akaike Information Criterion; Exchange Rate Change; High Regime (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/978-1-4899-7442-6_5

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