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Increasing Financial Market Integration, Real Exchange Rates and Macroeconomic Adjustment

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  • Adrian Blundell-Wignall
  • Frank Browne
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    Abstract

    This paper is one of four in this Working Paper Series, focusing on financial liberalisation, along with those of Kupiec, Miller and Weller, and Driscoll. It examines the extent to which international financial markets have become more integrated over the past decade. The finding that financial markets are almost fully integrated, in contrast to goods markets which are not, has important implications for real interest rate differentials, real exchange rate behaviour and external adjustment. In particular, the reduced importance of external imbalance and the increased role of real interest rates in real exchange rate determination can be associated with more prolonged misalignments ... Le présent document constitue l'une de quatre études de cette Série consacrée à la libéralisation financière, avec celles de Kupiec, de Miller et Weller, et de Driscoll. Il examine les progrès réalisés dans le processus d'intégration des marchés internationaux de capitaux au cours des dix dernières années. Le constat selon lequel les marchés financiers sont devenus très fortement intégrés, contrairement aux marchés de biens qui ne le sont pas, a d'importantes conséquences sur la formation des différentiels de taux d'intérêt réels, l'évolution des taux de change réels et l'ajustement extérieur. En particulier, l'importance réduite des déséquilibres externes et le rôle accrû joué par les taux d'intérêt réels dans la détermination des taux de change réels peuvent être associés à des phénomènes d'ajustements retardés ...

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    File URL: http://dx.doi.org/10.1787/336243304330
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 96.

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    Date of creation: Feb 1991
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    Handle: RePEc:oec:ecoaaa:96-en

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    Cited by:
    1. Hali J. Edison & William R. Melick, 1992. "Purchasing power parity and uncovered interest rate parity: the United States 1974-1990," International Finance Discussion Papers 425, Board of Governors of the Federal Reserve System (U.S.).
    2. Antoine Bouveret, 2010. "Politiques économiques, dynamique et équilibre de long terme du taux de change," Sciences Po publications info:hdl:2441/53r60a8s3ku, Sciences Po.
    3. Chinn, Menzie D. & Meese, Richard A., 1995. "Banking on currency forecasts: How predictable is change in money?," Journal of International Economics, Elsevier, vol. 38(1-2), pages 161-178, February.
    4. Georgios E. Chortareas & Rebecca L. Driver, 2001. "PPP and the real exchange rate-real interest rate differential puzzle revisited: evidence from non-stationary panel data," Bank of England working papers 138, Bank of England.
    5. Bruno Ducoudre & Antoine Bouveret, 2007. "On the Contingency of Equilibrium Exchange Rates with Time - Consistent Economic Policies," Sciences Po publications 2007-08, Sciences Po.
    6. Paresh Kumar Narayan & Russell Smyth, 2004. "The relationship between the real exchange rate and balance of payments: empirical evidence for China from cointegration and causality testing," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 287-291.
    7. J T Kneeshaw, 1995. "A survey of non-financial sector balance sheets in industialised countries: implications for the monetary policy transmission mechanism," BIS Working Papers 25, Bank for International Settlements.
    8. Abhisek Banerjee & Manmohan Singh, 2006. "Testing Real Interest Parity in Emerging Markets," IMF Working Papers 06/249, International Monetary Fund.
    9. Cushman, David O., 2007. "A portfolio balance approach to the Canadian-U.S. exchange rate," Review of Financial Economics, Elsevier, vol. 16(3), pages 305-320.
    10. Eiji Fujii & Menzie D. Chinn, 2000. "Fin de Siecle Real Interest Parity," NBER Working Papers 7880, National Bureau of Economic Research, Inc.
    11. Adrian Blundell-Wignall & Frank Browne, 1992. "Real Exchange Rates and the Globalisation of Financial Markets," RBA Research Discussion Papers rdp9203, Reserve Bank of Australia.
    12. repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9kd52ge69h is not listed on IDEAS

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