Portfolio Inflows and Real Effective Exchange Rates: Does the Sectorization Matter?

May 22, 2017

Preview Citation

Format: Chicago

Rasmané Ouedraogo. Portfolio Inflows and Real Effective Exchange Rates: Does the Sectorization Matter?, (USA: International Monetary Fund, 2017) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

It has been well-established in the literature that portfolio inflows appreciate the real effective exchange rate. However, the literature lacks a systematic empirical analysis of the impact of portfolio inflows by institutional sector or borrower type. This paper fills this gap by exploring the impact of the inflows of portfolio capital into three institutional sectors (government, banks and corporates) on the real effective exchange rate. Using a large sample of 73 countries, it shows that the effect of portfolio inflows on the real effective exchange rate depends on the sector the investment flows in. The findings are robust to different econometric methods, additional variables in the model, and various indicators of real effective exchange rates.

Subject: Balance of payments, Capital inflows, Exchange rates, Foreign exchange, International trade, Real effective exchange rates, Real exchange rates, Terms of trade

Keywords: Capital inflows, Exchange rate., Exchange rates, Global, Inflows channel, Portfolio capital, Portfolio flow, Portfolio inflow, Portfolio inflows, Real effective exchange rate, Real effective exchange rates, Real exchange rate, Real exchange rates, Sector, Terms of trade, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/121
Stock No:

WPIEA2017121
ISBN:

9781484301135
ISSN:

1018-5941

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