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Increasing Financial Market Integration, Real Exchange Rates and Macroeconomic Adjustment

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Adrian Blundell-Wignall
Frank Browne ()
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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Paper provided by OECD Economics Department 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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  1. Eiji Fujii & Menzie D. Chinn, 2000. "Fin de Siecle Real Interest Parity," NBER Working Papers 7880, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Debabrata Bagchi & Georgios E. Chortareas & Stephen M. Miller, 2003. "The Real Exchange Rate in Small Open Developed Economies: Evidence from Cointegration Analysis," Working papers 2003-27, University of Connecticut, Department of Economics. [Downloadable!]
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  3. Adrian Blundell-Wignall & Frank Browne, 1992. "Real Exchange Rates and the Globalisation of Financial Markets," RBA Research Discussion Papers rdp9203, Reserve Bank of Australia. [Downloadable!]
  4. 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. [Downloadable!]
  5. Shakila Aruman & Mardi Dungey, 2001. "A Perspective on Modelling the Real Trade Weighted Index Since the Float," CEPR Discussion Papers 435, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
  6. Georgios E. Chortareas & Rebecca L. Driver, . "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. [Downloadable!]
  7. Abhisek Banerjee & Manmohan Singh, 2006. "Testing Real Interest Parity in Emerging Markets," IMF Working Papers 06/249, International Monetary Fund. [Downloadable!]
  8. Antoine Bouveret & Bruno Ducoudré, 2007. "On the contingency of equilibrium exchange rates with time- consistent economic policies," Documents de Travail de l'OFCE 2007-08, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
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