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on International Finance |
| By: | Maria Gelman; Axel Jochem; Stefan Reitz; Mark P. Taylor |
| 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 |
| JEL: | F31 G15 E58 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1945&r=ifn |
| By: | Matthew Greenwood-Nimmo (Department of Economics, The University of Melbourne); Viet Hoang Nguyen (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Yongcheol Shin (Department of Economic and Related Studies, University of York) |
| Abstract: | We develop a global vector autoregressive model to study the transmission of information between currency spot markets. Our model accounts for both simultaneous and dynamic interactions between exchange rates and order flows using historical data from the Reuters Dealing 2000–1 platform for the period May–August 1996. By analysing the network topography of the system, we find that currency markets are intricately linked and that the Deutsche Mark and the Yen exert a leading influence over the European currencies. Furthermore, using a novel technique we find that the Yen and Sterling act as safe haven currencies. |
| Keywords: | Exchange rates, order flows, global VAR, connectedness and spillovers, safe haven currency |
| JEL: | C32 C51 F31 G15 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2014n17&r=ifn |