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

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Author Info
Antonio Díez de los Ríos () (CEMFI)

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Abstract

We use a multifactor asset pricing model for currency, bond and stocks for fourteen emerging markets over the period from 1997 to middle 2001 to investigate the effect of the exchange rate regime on the cost of capital, the integration of financial emerging markets and the issue of contagion. We find no evidence that a fixed exchange rate regime has helped to reduce the cost of capital and we are not able to reject that emerging equity markets are integrated. Finally, there is evidence that the transmission of shocks is beyond of what can be explained by fundamentals or common shocks.

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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2003/51.

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Length: 47 pages
Date of creation: 2003
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Handle: RePEc:cea:doctra:e2003_51

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Related research
Keywords: Financial Crisis Contagion Time-Varying Volatility Financial Integration International Asset Pricing

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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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  19. Tim Bollerslev & Jeffrey M. Wooldridge, 1988. "Quasi-Maximum Likelihood Estimation of Dynamic Models with Time-Varying Covariances," Working papers 505, Massachusetts Institute of Technology (MIT), Department of Economics.
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  26. repec:rus:hseeco:181565 is not listed on IDEAS
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  29. Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2002. "Some Contagion, Some Interdependence: More Pitfalls in Tests of Financial Contagion," CEPR Discussion Papers 3310, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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