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Exchange Rates and External Adjustment: Does Financial Globalization Matter?

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Author Info

  • Philip Lane
  • Gian Maria Milesi-Ferretti

Abstract

This paper addresses the implications of financial globalization for exchange rate behavior. We highlight two dimensions: first, a wider dispersion in net foreign asset positions implies stronger long-term trends in real exchange rates; second, the impact of currency movements on net external wealth is an increasing function of the scale of international balance sheets.

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Bibliographic Info

Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp129.

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Date of creation: 22 May 2006
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Handle: RePEc:iis:dispap:iiisdp129

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Keywords: Financial integration; exchange rates;

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References

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  1. Gourinchas, Pierre-Olivier & Rey, Hélène, 2005. "From World Banker to World Venture Capitalist: US External Adjustment and The Exorbitant Privilege," CEPR Discussion Papers 5220, C.E.P.R. Discussion Papers.
  2. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2001. "Long-Term Capital Movements," CEPR Discussion Papers 2873, C.E.P.R. Discussion Papers.
    • Philip R. Lane & Gian Maria Milesi-Ferretti, 2002. "Long-Term Capital Movements," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 73-136 National Bureau of Economic Research, Inc.
  3. Gian-Maria Milesi-Ferretti & Philip R. Lane, 2000. "The Transfer Problem Revisited: Net Foreign Assets and Real Exchange Rates," IMF Working Papers 00/123, International Monetary Fund.
  4. Maurice Obstfeld & Kenneth Rogoff, 2007. "The Unsustainable U.S. Current Account Position Revisited," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 339-376 National Bureau of Economic Research, Inc.
  5. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2001. "The external wealth of nations: measures of foreign assets and liabilities for industrial and developing countries," Journal of International Economics, Elsevier, vol. 55(2), pages 263-294, December.
  6. Philip R. Lane & Gian Maria Milesi-Ferretti, 2005. "Financial Globalisation and Exchange Rates," The Institute for International Integration Studies Discussion Paper Series iiisdp044, IIIS.
  7. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2002. "External Wealth, the Trade Balance and the Real Exchange Rate," CEPR Discussion Papers 3153, C.E.P.R. Discussion Papers.
  8. Michael B. Devereux & Philip Lane, 2001. "Exchange Rates and Monetary Policy in Emerging Market Economies," Trinity Economics Papers 200111, Trinity College Dublin, Department of Economics.
  9. Maurice Obstfeld, 2004. "External Adjustment," NBER Working Papers 10843, National Bureau of Economic Research, Inc.
  10. Maurice Obstfeld & Kenneth S. Rogoff, 2005. "Global Current Account Imbalances and Exchange Rate Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(1), pages 67-146.
  11. Philip R. Lane & Gian Maria Milesi-Ferretti, 2007. "A Global Perspective on External Positions," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 67-102 National Bureau of Economic Research, Inc.
  12. Philip R. Lane & G.M. Milesi-Ferretti, 2003. "International Financial Integration," Trinity Economics Papers 20031, Trinity College Dublin, Department of Economics.
  13. Pierre-Olivier Gourinchas & Hélène Rey, 2005. "International Financial Adjustment," International Finance 0505004, EconWPA.
  14. Philip R. Lane & Gian-Maria Milesi-Ferretti, 2000. "External Capital Structure-Theory and Evidence," IMF Working Papers 00/152, International Monetary Fund.
  15. repec:tcd:wpaper:tep16 is not listed on IDEAS
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Citations

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Cited by:
  1. Agustín Bénétrix, 2007. "The Anatomy of Large Valuation Episodes," The Institute for International Integration Studies Discussion Paper Series iiisdp227, IIIS.
  2. Megumi Kubota, . "Assessing the Real Exchange Rate Misalignments: Is Real Undervaluation of the Currency Likely and Can It Be Sustained?," Discussion Papers 09/25, Department of Economics, University of York.
  3. Megumi Kubota, . "Real Exchange Rate Misalignments: Theoretical Modelling and Empirical Evidence," Discussion Papers 09/24, Department of Economics, University of York.
  4. Balli, Faruk & Louis, Rosmy J. & Osman, Mohammad, 2008. "International Portfolio Allocation and Income Smoothing: Evidence from Recent Changes in Euro Region," MPRA Paper 10160, University Library of Munich, Germany.

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