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Exchange Rate Regimes, Globalisation, and the Cost of Capital in Emerging Markets

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Antonio Diez de los Rios

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Abstract

This paper presents a multifactor asset pricing model for currency, bond, and stock returns for ten emerging markets to investigate the effect of the exchange rate regime on the cost of capital and the integration of emerging financial markets. Since there is evidence that a fixed exchange rate regime reduces the currency risk premia demanded by foreign investors, the tentative conclusion is that a fixed exchange rate regime system can help reduce the cost of capital in emerging markets.

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Paper provided by Bank of Canada in its series Working Papers with number 07-29.

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Length: 36 pages
Date of creation: 2007
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Handle: RePEc:bca:bocawp:07-29

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Related research
Keywords: Exchange rate regimes; Development economics;

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Find related papers by JEL classification:
F30 - International Economics - - International Finance - - - General
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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