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Export pricing and the cross‐country correlation of stock prices
Author(s) -
Tervala Juha
Publication year - 2011
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2011.03.002
Subject(s) - economics , stock (firearms) , monetary economics , currency , negative correlation , positive correlation , shock (circulatory) , financial economics , mechanical engineering , medicine , engineering
This study analyses the cross‐country correlation of stock prices (values of firms) using the basic New Open Economy Macroeconomics model. It is shown that cross‐country correlations of stock prices greatly depend on the currency of export pricing in the case of monetary shocks but not notably for temporary technology shocks. In the case of a money supply shock, the producer (local) currency pricing version of the model generates negative (positive) cross‐country correlation of stock prices.