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Exchange Rate Regimes, Globalisation, and the Cost of Capital in Emerging Markets

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  • Antonio Diez de los Rios

Abstract

This paper presents a multifactor asset pricing model for currency, bond, and stock returns for ten emerging markets to investigate the effect of the exchange rate regime on the cost of capital and the integration of emerging financial markets. Since there is evidence that a fixed exchange rate regime reduces the currency risk premia demanded by foreign investors, the tentative conclusion is that a fixed exchange rate regime system can help reduce the cost of capital in emerging markets.

Suggested Citation

  • Antonio Diez de los Rios, 2007. "Exchange Rate Regimes, Globalisation, and the Cost of Capital in Emerging Markets," Staff Working Papers 07-29, Bank of Canada.
  • Handle: RePEc:bca:bocawp:07-29
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    References listed on IDEAS

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    Cited by:

    1. Lucey, Brian M. & Muckley, Cal, 2011. "Robust global stock market interdependencies," International Review of Financial Analysis, Elsevier, vol. 20(4), pages 215-224, August.

    More about this item

    Keywords

    Exchange rate regimes; Development economics;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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