International Financial Market Integration, Asset Compositions and the Falling Exchange Rate Pass-Through

Almira Buzaushina, Zeno Enders and Mathias Hoffmann ()

No 569, Working Papers from University of Heidelberg, Department of Economics

Abstract: This paper provides an explanation for the observed decline of the exchange rate pass-through into import prices by modeling the effects of financial market integration on the optimal choice of the pricing currency in the context of rigid nominal goods prices. Contrary to previous literature, the interdependence of this choice with the optimal portfolio choice of internationally traded financial assets is explicitly taken into account. In particular, price setters move towards more local-currency pricing while the debt portfolio includes more foreign assets following increased financial integration. Both predictions are in line with novel empirical evidence.

Keywords: Exchange rate pass-through; financial integration; portfolio home bias; international price setting (search for similar items in EconPapers)
Date: 2014-06-18
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-opm
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://nbn-resolving.de/urn:nbn:de:bsz:16-heidok-170618 Frontdoor page on HeiDOK (text/html)
https://archiv.ub.uni-heidelberg.de/volltextserver ... fmann_2014_dp569.pdf (application/pdf)

Related works:
Journal Article: International financial market integration, asset compositions, and the falling exchange rate pass-through (2018)
Working Paper: International Financial Market Integration, Asset Compositions, and the Falling Exchange Rate Pass-Through (2017)
Working Paper: International Financial Market Integration, Asset Compositions, and the Falling Exchange Rate Pass-Through (2016)
Working Paper: International financial market integration, asset compositions, and the falling exchange rate pass-through (2015)
Working Paper: International Financial Market Integration, Asset Compositions and the Falling Exchange Rate Pass-Through (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:awi:wpaper:0569

Access Statistics for this paper

More papers in Working Papers from University of Heidelberg, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Gabi Rauscher ( this e-mail address is bad, please contact ).