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Portfolio Inflows and Real Effective Exchange Rates: Does the Sectorization Matter?

Author

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  • Rasmané Ouedraogo

Abstract

It has been well-established in the literature that portfolio inflows appreciate the real effective exchange rate. However, the literature lacks a systematic empirical analysis of the impact of portfolio inflows by institutional sector or borrower type. This paper fills this gap by exploring the impact of the inflows of portfolio capital into three institutional sectors (government, banks and corporates) on the real effective exchange rate. Using a large sample of 73 countries, it shows that the effect of portfolio inflows on the real effective exchange rate depends on the sector the investment flows in. The findings are robust to different econometric methods, additional variables in the model, and various indicators of real effective exchange rates.

Suggested Citation

  • Rasmané Ouedraogo, 2017. "Portfolio Inflows and Real Effective Exchange Rates: Does the Sectorization Matter?," IMF Working Papers 2017/121, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2017/121
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    Cited by:

    1. Ferry Syarifuddin, 2020. "The Dynamics Of Foreign Portfolio Investment And Exchange Rate: An Interconnection Approach In Asean," Working Papers WP/08/2020, Bank Indonesia.
    2. Rasmané Ouedraogo & Elodie Marlet, 2018. "Foreign Direct Investment and Women Empowerment: New Evidence on Developing Countries," IMF Working Papers 2018/025, International Monetary Fund.

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