Please use this identifier to cite or link to this item:
http://dspace.mediu.edu.my:8181/xmlui/handle/10419/19700| Title: | International investment positions and exchange rate dynamics: a dynamic panel analysis |
| Keywords: | C23 F37 F31 ddc:330 Exchange Rate Determination International Financial Integration Dynamic Panel Data Models Wechselkurs Volatilität Kaufkraftparität Internationale Kapitalmobilität Standortfaktor Schätzung Welt |
| Issue Date: | 16-Oct-2013 |
| Description: | In this paper we revisit medium- to long-run exchange rate determination, focusing on the role of international investment positions. To do so, we develop a new econometric framework accounting for conditional long-run homogeneity in heterogeneous dynamic panel data models. In particular, in our model the long-run relationship between effective exchange rates and domestic as well as weighted foreign prices is a homogeneous function of a country's international investment position. We find rather strong support for purchasing power parity in environments of limited negative net foreign asset to GDP positions, but not outside such environments. We thus argue that the purchasing power parity hypothesis holds conditionally, but not unconditionally, and that international investment positions are an essential component to characterizing this conditionality. Finally, we adduce evidence that whether deterioration of a country's net foreign asset to GDP position leads to a depreciation of that country's effective exchange rate depends on its rate of inflation relative to the rate of inflation abroad as well as its exposure to global shocks. |
| URI: | http://koha.mediu.edu.my:8181/xmlui/handle/10419/19700 |
| Other Identifiers: | http://hdl.handle.net/10419/19700 ppn:54347626X RePEc:zbw:bubdp1:6144 |
| Appears in Collections: | EconStor |
Files in This Item:
There are no files associated with this item.
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.