Title: Real Financial Market Exchange Rates and Capital Flows
Abstract: Foreign exchange rates and capital movements are expected to be closely related to each other as international capital markets become more and more integrated. To account for this fact we construct an index of real effective exchange rates as a weighted average of cross-country asset price ratios. The empirical analysis reveals that a country's real financial effective exchange rate is cointegrated with net foreign holdings of its assets. Comparing the empirical performance of the new index with a standard effective exchange rate deflated by goods prices we find that only the former exhibits an influence on the international flow of capital.
Publication Year: 2013
Publication Date: 2013-01-01
Language: en
Type: article
Access and Citation
Cited By Count: 3
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot