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Exchange Rates and Net Portfolio Flows: A Markov-Switching Approach

In: Hidden Markov Models in Finance

Author

Listed:
  • Faek Menla Ali

    (Brunel University London)

  • Fabio Spagnolo

    (Brunel University London)

  • Nicola Spagnolo

    (Brunel University London
    Centre for Applied Macroeconomic Analysis (CAMA))

Abstract

In this paper we investigate the impact of net bond and equity portfolio flows on exchange rate changes. Two-state Markov-switching models are estimated for Canada, the euro area, Japan and the UK exchange rates vis-à-vis the US dollar. Our results suggest that the relationship between net portfolio flows and exchange rate changes is nonlinear for all currencies considered but Canada.

Suggested Citation

  • Faek Menla Ali & Fabio Spagnolo & Nicola Spagnolo, 2014. "Exchange Rates and Net Portfolio Flows: A Markov-Switching Approach," International Series in Operations Research & Management Science, in: Rogemar S. Mamon & Robert J. Elliott (ed.), Hidden Markov Models in Finance, edition 127, chapter 0, pages 117-132, Springer.
    • Handle: RePEc:spr:isochp:978-1-4899-7442-6_5
    DOI: 10.1007/978-1-4899-7442-6_5
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    Cited by:

    1. Faek Menla Ali & Fabio Spagnolo & Nicola Spagnolo, 2017. "Portfolio flows and the US dollar–yen exchange rate," Empirical Economics, Springer, vol. 52(1), pages 179-189, February.
    2. Guglielmo Maria Caporale & Faek Menla Ali & Fabio Spagnolo & Nicola Spagnolo, 2015. "International Portfolio Flows and Exchange Rate Volatility for Emerging Markets," CESifo Working Paper Series 5615, CESifo.

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