New Shocks, Exchange Rates and Equityprices
Object category:
Elektronische Ressource
Person/Institution:
Publisher:
International Monetary Fund
Ort:
Washington, D.C
Date:
2008
Language:
Englisch
Additional information
Abstract:
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
Object text:
Cova, Pietro
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Online-Ausg.
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Administrative details
Created:
2023-04-13
Last changed:
2023-01-26
Added to portal:
2023-04-13
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