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Exchange Rates and Capital Flows
Author(s) -
Brooks Robin,
Edison Hali,
Kumar Manmohan S.,
Sløk Torsten
Publication year - 2004
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1354-7798.2004.00261.x
Subject(s) - liberian dollar , portfolio , monetary economics , economics , exchange rate , capital flows , net capital rule , productivity , capital (architecture) , financial economics , finance , macroeconomics , market economy , geography , liberalization , archaeology
This paper explores the ability of portfolio and foreign direct investment flows to track movements in the euro and the yen against the dollar. Net portfolio flows from the euro area into US stocks – possibly reflecting differences in expected productivity growth – track movements in the euro against the dollar closely. Net FDI flows, which capture the recent burst in cross‐border M&A activity, appear less important in tracking movements in the euro‐dollar rate, possibly because many M&A transactions consist of share swaps. Movements in the yen versus the dollar remain more closely tied to conventional variables such as the current account and interest differential.