Stock Markets and Real Exchange Rate: An Intertemporal Approach

Front Cover
International Monetary Fund, 2003 - Economic forecasting - 35 pages
The paper presents an N-country model with stock markets, in which a closed-form solution for the real exchange rate is derived. Risky asset prices and allocation of risky assets among countries are determined endogenously. Such a framework allows an analysis of how fundamental parameters, such as the variance and covariance of the risky assets or demographic variables, affect the real exchange rate. The predictions of the model are contrasted with the Balassa-Samuelson effect. A new transmission channel of the real exchange rate for parameters such as income on net foreign assets, risk aversion, and risk-hedging opportunities is also explored.

From inside the book

What people are saying - Write a review

We haven't found any reviews in the usual places.


Real Exchange Rate in an Intertemporal NCountry Model with Incomplete Markets

Other editions - View all

Common terms and phrases

Bibliographic information