Exchange Rates and Capital Flows

Author/Editor:

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

Publication Date:

December 1, 2001

Electronic Access:

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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.

Series:

Working Paper No. 2001/190

Subject:

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

English

Publication Date:

December 1, 2001

ISBN/ISSN:

9781451859669/1018-5941

Stock No:

WPIEA1902001

Pages:

28

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