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Financial Globalization and Exchange Rates

  • Gian-Maria Milesi-Ferretti
  • Philip R. Lane

The founders of the Bretton Woods System 60 years ago were primarily concerned with orderly exchange rate adjustment in a world economy that was characterized by widespread restrictions on international capital mobility. In contrast, the rapid pace of financial globalization during recent years poses new challenges for the international monetary system. In particular, large gross cross-holdings of foreign assets and liabilities mean that the valuation channel of exchange rate adjustment has grown in importance, relative to the traditional trade balance channel. Accordingly, this paper empirically explores some of the interconnections between financial globalization and exchange rate adjustment and discusses the policy implications.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/3.

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Length: 45
Date of creation: 01 Jan 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/3
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  1. Pavlova, Anna & Rigobon, Roberto, 2004. "Asset Prices and Exchange Rates," Working papers 4322-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Harald Hau & Hélène Rey, 2006. "Exchange Rates, Equity Prices, and Capital Flows," Review of Financial Studies, Society for Financial Studies, vol. 19(1), pages 273-317.
  3. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2001. "The external wealth of nations: measures of foreign assets and liabilities for industrial and developing countries," Journal of International Economics, Elsevier, vol. 55(2), pages 263-294, December.
  4. Jonathan Heathcote & Fabrizio Perri, 2001. "Financial Globalization and Real Regionalization," Working Papers 01-11, New York University, Leonard N. Stern School of Business, Department of Economics.
  5. Sebnem Kalemli-Ozcan & Bent E. S�rensen & Oved Yosha, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," Working Papers 99-16, Brown University, Department of Economics.
  6. Pierre-Olivier Gourinchas & Hélène Rey, 2005. "International financial adjustment," Proceedings, Federal Reserve Bank of San Francisco.
  7. Benigno, Pierpaolo, 2001. "Price Stability with Imperfect Financial Integration," CEPR Discussion Papers 2854, C.E.P.R. Discussion Papers.
  8. repec:cup:cbooks:9780521633178 is not listed on IDEAS
  9. Cedric Tille, 2003. "The impact of exchange rate movements on U.S. foreign debt," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Jan).
  10. repec:cup:cbooks:9780521671798 is not listed on IDEAS
  11. Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May.
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