Exchange Rates and Capital Flows

Robin Brooks, Torsten Sloek, Manmohan Kumar and Hali Edison ()

No 2001/190, IMF Working Papers from International Monetary Fund

Abstract: This paper explores the ability of portfolio and foreign direct investment flows to track movements in the euro and the yen against the dollar. Net portfolio flows from the euro area into U.S. stocks—possibly reflecting differences in expected productivity growth—track movements in the euro against the dollar closely. Net FDI flows, which capture the recent burst in cross-border M&A activity, appear less important in tracking movements in the euro-dollar rate, possibly because many M&A transactions consist of share swaps. Movements in the yen versus the dollar remain more closely tied to such conventional variables as the current account and interest differential.

Keywords: WP; euro; dollar; exchange rate; Euro area; exchange rate models; euro/dollar and yen/dollar exchange rates; capital flows; dollar rate; exchange rate movement; euro weakness; euro-dollar exchange rate; interest rate differential; deutsche mark; Exchange rates; Current account; Stocks; Currencies; Europe; Global (search for similar items in EconPapers)
Pages: 28
Date: 2001-12-01
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Citations: View citations in EconPapers (36)

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Journal Article: Exchange Rates and Capital Flows (2004)
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