Exchange rate regimes and asset prices

Harris Dellas () and George Tavlas

Journal of International Money and Finance, 2013, vol. 38, issue C, 85-94

Abstract: We study the implications of alternative exchange rate regimes for asset prices in a portfolio balance model motivated by the recent US-China experience. We establish that asset price responses to various shocks differ across a flexible regime and a -unilateral- peg but the differences for most shocks tend to be rather small. Moreover, while both monetary and public debt expansions have inflationary effects on equity prices, the latter's impact is stronger under a flexible exchange rate regime. These two findings suggest that a flexible USD/rimni rate would not have limited the recent asset price inflation in the US.

Keywords: Asset price inflation; Exchange rate regime; Portfolio balance; US-China (search for similar items in EconPapers)
JEL-codes: E4 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:38:y:2013:i:c:p:85-94

DOI: 10.1016/j.jimonfin.2013.05.008

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