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Real financial market exchange rates and capital flows

Maria Gelman, Axel Jochem, Stefan Reitz and Mark Taylor

No 1945, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Foreign exchange rates, asset prices and capital movements are expected to be closely related to each other as international capital markets become more and more integrated. This paper provides new empirical evidence from an index of exchange-rate adjusted cross-country asset price ratios, which may be interpreted as a real effective financial exchange rate. The integrated stock-flow approach reveals that a county's real effective financial exchange rate is co-integrated with international investors' net foreign holding of its assets. The associated error correction equations have useful interpretations against the backdrop of uncovered return parity and investor portfolio rebalancing behavior.

Keywords: Real Effective Exchange Rate; Capital Flows; Financial Markets (search for similar items in EconPapers)
JEL-codes: E58 F31 G15 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/100074/1/791667944.pdf (application/pdf)

Related works:
Journal Article: Real financial market exchange rates and capital flows (2015) Downloads
Working Paper: Real financial market exchange rates and capital flows (2013) Downloads
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