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New shocks, exchange rates and equity prices
Matsumoto, Akito (Author)

URLURL - Presentation file, Visit http://www.imf.org/external/pubs/ft/wp/2008/wp08284.pdf This link opens in a new window

Abstract
We study exchange rate and equity price dynamics, in general equilibrium, in the presence of news shocks about future productivity and monetary policy. We identify a condition under which these asset prices become more volatile without affecting the volatility of the underlying processes - - a positive correlation between news and current shocks. This condition also explains why persistent underlying processes generate volatile asset prices. In addition, we show that the correlation between exchange rate and equity returns depends critically on the currency denomination of the equity return and the monetary policy reaction to productivity shocks. The model we set up does well at matching second moments of exchange rate and equity returns for major floating currencies.

Language:English
Keywords:finance, devizni tečaji, monetarna politika, produktivnost, cena, donosnost kapitala, dinamika, ekonometrija, modeli, finance, exchange rate, monetary policy, productivity, price, return on equity, dynamics, econometrics, models
Work type:Not categorized (r6)
Organization:EF - Faculty of Economics
Year:2008
Publisher:International Monetary Fund
Number of pages:36 str.
Place:Washington (D.C.)
UDC:336.76
COBISS.SI-ID:18516966 Link is opened in a new window
Views:577
Downloads:205
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