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Exchange Rates and Asset Prices in a Global Demand System

Ralph Koijen and Motohiro Yogo

No 27342, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop an asset demand system to study exchange rates, short-term rates, long-term yields, and equity prices across 37 countries. Using international portfolio holdings data, we estimate the asset demand system by instrumental variables. We develop a unified framework to decompose the variation in exchange rates and asset prices into portfolio flows and shifts in asset demand, to interpret economic events such as the European sovereign debt crisis, and to estimate the convenience yield on US assets. The convenience yield is 1.45 percent on the US dollar, 2.81 percent on long-term debt, and 0.50 percent on equity.

JEL-codes: E52 F31 G12 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
Note: AP EFG IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Working Paper: Exchange Rates and Asset Prices in a Global Demand System (2020) Downloads
Working Paper: Exchange Rates and Asset Prices in a Global Demand System (2020) Downloads
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