Working Papers in full text
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
All
Other research-related activities and publications of the IMF can be found at IMF Research
|
Free Email Notification
Receive emails when we post new
items of interest to you.
Subscribe or
Modify your profile
|
|
|
|
New Shocks, Exchange Rates and EquityPrices
|
Author/Editor: |
Matsumoto, Akito | Cova, Pietro | Pisani, Massimiliano | Rebucci, Alessandro |
| Authorized for Distribution: |
December 1, 2008 |
|
Electronic Access: |
Free Full Text (PDF file size is 760KB)
Use the free Adobe Acrobat Reader to view this PDF file.
|
|
|
|
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: 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.
|
|
|
|
Series: |
Working Paper No. 08/284 |
|
Subject(s): |
External shocks | Exchange rates | Stock prices | Productivity | Monetary policy | Asset prices | Floating exchange rates | Economic models |
|
Author's keyword(s): |
News Shocks | Exchange Rates | Equity Prices | Productivity | Monetary Policy | Persistence |
|
|
|
|
| |
Published: |
|
December 1, 2008 |
|
|
|
|
| |
|
|
|
|
Format: |
|
Paper |
| |
Stock No: |
|
WPIEA2008284 |
|
Pages: |
|
36 |
| |
Price: |
|
US$18.00 (Academic Rate: US$18.00 )
|
|
|
|
|
|
|
