Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100074
Authors: 
Gelman, Maria
Jochem, Axel
Reitz, Stefan
Taylor, Mark P.
Year of Publication: 
2014
Series/Report no.: 
Kiel Working Paper 1945
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.
Subjects: 
Real Effective Exchange Rate
Capital Flows
Financial Markets
JEL: 
F31
G15
E58
Document Type: 
Working Paper

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