Are Different-Currency Assets Imperfect Substitutes?

Martin Evans and Richard K. Lyons

Chapter 10 in Studies in Foreign Exchange Economics, 2017, pp 415-456 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The idea that different-currency assets are imperfect substitutes occupies an important place within exchange-rate economics. It is still invoked, for example, for why sterilized intervention can be effective. And theoretical work continues to rely on this assumption. Yet, supportive empirical evidence is scant. This paper addresses the gap between theory and empirics. We test imperfect substitutability in a new, more powerful way and find it strongly supported…

Keywords: Exchange Rates; Foreign Currency; Microstructure (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Are Different-Currency Assets Imperfect Substitutes? (2003)
Working Paper: Are Different-Currency Assets Imperfect Substitutes? (2000)
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