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Are International Fund Flows Related to Exchange Rate Dynamics?

Author

Listed:
  • Suxiao Li

    (Postdoctoral workstation, Industrial and Commercial Bank of China
    University of Groningen
    University of Chinese Academy of Sciences)

  • Jakob de Haan

    (University of Groningen
    De Nederlandsche Bank
    CESifo)

  • Bert Scholtens

    (University of Groningen
    University of Saint Andrews)

Abstract

Employing monthly data for 53 countries between 1996 and 2015, we investigate the relationship between international fund flows and exchange rate dynamics. We find strong co-movement between funds flows (as measured with the EPFR Global data base) and bilateral real exchange rates vis-à-vis the USD. This holds both for equity flows and bond flows. However, bond flows have a more significant relationship with RER appreciation than equity flows in developing countries, while in developed countries equity flows play a more important role. Under a more flexible exchange rate regime the real exchange rate appreciation associated with fund flows is higher.

Suggested Citation

  • Suxiao Li & Jakob de Haan & Bert Scholtens, 2018. "Are International Fund Flows Related to Exchange Rate Dynamics?," Open Economies Review, Springer, vol. 29(1), pages 31-48, February.
    • Handle: RePEc:kap:openec:v:29:y:2018:i:1:d:10.1007_s11079-017-9469-5
    DOI: 10.1007/s11079-017-9469-5
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    Cited by:

    1. Utku Altunoz, 2020. "Determining the Interaction of the International Portfolio Flows with Exchange Rate Volatility in Developing Countries," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 6(1), pages 41-54, June.

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    More about this item

    Keywords

    International fund flows; Exchange rates; Exchange rate regime; Dynamic panel data model;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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