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Capital flows, financial asset prices and real financial market exchange rate: A case study for an emerging market, India

Saurabh Ghosh and Stefan Reitz

No 461, Kiel Advanced Studies Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this paper we empirically investigate the relationship between capital flows and exchange rates in India based on a new index of real effective exchange rates for the Indian Rupiah. Instead of using consumer price indices we deflate exchange rates by MSCI asset price indices. The cointegration analysis indicates a long-run equilibrium relationship between our real financial market exchange rate and the net outstanding equity investment in India. In the short run capital inflows are accompanied by an appreciation of real financial exchange rate of the Rupiah.

Keywords: Real Exchange Rate; Capital Flows; Financial Asset Prices; Emerging Financial Markets; India (search for similar items in EconPapers)
JEL-codes: E58 F31 G15 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Capital Flows, Financial Asset Prices and Real Financial Market Exchange Rate: A Case Study for an Emerging Market, India (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwasw:461

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