Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88439
Authors: 
Gelman, Maria
Jochem, Axel
Reitz, Stefan
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 50/2013
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.
Subjects: 
Real Effective Exchange Rate
Capital Flows
Financial Markets
JEL: 
F31
G15
E58
ISBN: 
978-3-86558-989-7
Document Type: 
Working Paper

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