Exchange Rates and Capital Flows

By Robin Brooks, Torsten M Sloek, Manmohan S. Kumar, Hali J Edison

December 1, 2001

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Robin Brooks, Torsten M Sloek, Manmohan S. Kumar, and Hali J Edison. Exchange Rates and Capital Flows, (USA: International Monetary Fund, 2001) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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 U.S. 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 such conventional variables as the current account and interest differential.

Subject: Balance of payments, Capital flows, Currencies, Current account, Exchange rates, Financial institutions, Foreign exchange, Money, Stocks

Keywords: Capital flows, Currencies, Current account, Deutsche mark, Dollar, Dollar rate, Euro, Euro area, Euro weakness, Euro/dollar and yen/dollar exchange rates, Euro-dollar exchange rate, Europe, Exchange rate, Exchange rate models, Exchange rate movement, Exchange rates, Global, Interest rate differential, Stocks, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/190
Stock No:

WPIEA1902001
ISBN:

9781451859669
ISSN:

1018-5941

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